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Levers of influence, Middle East and the Gulf, Economic power

  • FDI dominates external finance for high-income Middle Eastern economies, which are net providers of ODA and remittances rather than recipients. Lower- and middle-income economies rely far more heavily on ODA and remittances, while the five middle-income borrowers tracked paid external creditors USD 18.5 bn more than they received in new borrowing over 2022–2024.
  • The EU remains the region's largest FDI counterpart despite a declining share, the US is the only major actor gaining on every measure — driven largely by a 29% rise in investment in Israel — and the Gulf outranks China, India and Japan combined, whose collective presence stays small and largely static.

External economic engagement with the Middle East and the Gulf takes very different forms depending on a country's income level: high-income economies attract investment and export capital, while lower- and middle-income economies depend far more on aid and remittance flows, and increasingly on servicing existing debt. This chapter examines foreign direct investment, official development assistance, remittances and external debt to trace how these financial relationships are distributed across external actors and across the region.

For high-income economies, FDI dominates external finance across the selected comparison measures (FDI, ODA and remittances): these economies provide rather than receive ODA and are predominantly sources of, rather than destinations for, remittances. Between 2019-2021 and 2022-2024, their average annual inflows rose from USD 52.8 bn to USD 90.3 bn. In lower- and middle-income countries, remittances and ODA carry far greater weight, while net FDI is weak (Iraq alone turns an otherwise positive four-country balance into an average annual net outflow of USD 2.3 billion). ODA remains especially important for conflict-affected economies, averaging USD 13.3 bn a year across the six recipients in 2022–2024. Debt adds a different form of exposure, reflecting accumulated obligations rather than new financing. Collectively, over 2022-2024 the five middle-income borrowers covered paid external creditors USD 18.5 bn more in principal and interest than they received in new borrowing.

 

Foreign direct investment

 

EU remains the Middle East’s largest recorded FDI counterpart, with its decline confined to share rather than value. Its share fell from 42.6% to 37.1% in the high-income group and from 41.4% to 38.6% in the lower-income group, while investment values still rose: by 3.5% in the lower-income group and by 2% in the high-income group once Saudi Arabia’s 2024 reporting break is excluded.

 

The United States ranks second in the high-income group and is the only major counterpart to gain on every measure, rising from USD 80 bn to USD 89 bn and from 11.4% to 12.3% of stock. Almost all of the increase came from Israel, where US-linked investment rose by 29% to USD 53 bn while retaining a steady share of about one fifth.

 

The Gulf ranks third in the high-income group, with USD 81 bn and 11.1% of stock — more than China, India and Japan combined — and second in the lower-income group, at 12.9%. Its composition differs sharply: the UAE and Kuwait account for two thirds of the high-income position, while Kuwait alone accounts for 85% of the lower-income position.

 

Asian investors remain small and largely static. China, Japan, India and South Korea together increased their share of high-income stock only from 5.2% to 5.4%. Japan is stable and South Korea negligible, while the recorded disappearance of Russian and Iranian investment reflects reporting gaps rather than confirmed economic withdrawal.

 

Conclusion

External financial engagement with the Middle East and the Gulf splits sharply along income lines: high-income economies attract capital and export it in turn, while lower- and middle-income economies depend far more on aid, remittances and, increasingly, the cost of servicing existing debt. Within FDI specifically, the EU remains the largest counterpart despite a shrinking share, the US is the only major actor gaining ground — largely on the back of investment in Israel — and Asian investors remain a marginal, largely static presence behind the Gulf.

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