meed-logo

line1 line2 line3
SIGN IN / REGISTER

Foreign policy issues cloud Bahrain’s horizon

8 November 2023

MEED’s December 2023 special report on Bahrain also includes: 

> Bahrain waits for major infrastructure projects
> Bahrain takes renewables strides
> Bahrain charts pathway to net-zero future
> Bahrain banks have cause for cheer

 

Bahrain’s Sheikh Khalid bin Hamad al-Khalifa, first deputy chairman of the Supreme Council for Youth & Sports and head of the Bahrain Olympic Committee, flew into Doha on 28 October to watch his compatriots take on Japan in the final of the Asian Men’s Handball Qualification Tournament for the 2024 Paris Olympics.

Sheikh Khalid was welcomed on arrival by Qatar's Sheikh Thani bin Hamad al-Thani in what was another sign of the ongoing process of rapprochement between the two countries, following the 2017-21 boycott of Qatar by Bahrain, the UAE and Saudi Arabia.

The rebuilding of the bilateral relationship has been a slow process. Indeed, Bahraini officials complained on several occasions in 2022 that Qatar had repeatedly declined to take up its offer of talks.

However, the process picked up momentum in early 2023, with several meetings at the headquarters of the Gulf Co-operation Council in Riyadh. In mid-April, the two sides agreed to restore full diplomatic relations, although they have yet to reopen embassies or appoint new ambassadors.

Regional tensions

Other foreign policy issues are causing greater diplomatic headaches these days. As one of the two Gulf countries to sign normalisation deals with Israel, Bahrain has found itself in a difficult position in light of the Hamas attack on Israel on 7 October and the subsequent heavy bombardment of Gaza by Israeli forces.

That issue rose to the fore on 2 November, when the Council of Representatives issued a statement saying the Israeli and Bahraini ambassadors to each other’s country had returned home and there had been a “cessation of economic relations”.

This was initially taken by many commentators to mean that diplomatic relations had been broken off, but the reality appears to be a suspension rather than a formal severance of ties. The Bahrain government subsequently issued a statement confirming its ambassador to Tel Aviv had returned home “some time ago” and the Israeli ambassador to Manama had also left. There had been protests outside the embassy since the Hamas-Israel war began.

In addition, direct flights between Bahrain International airport and Tel Aviv airport “stopped as of several weeks ago”, Manama said.

However, the statement made no mention of diplomatic relations being cut. The Israeli government meanwhile said that bilateral relations were “stable”.

However, there is clear potential for the war to escalate and the Bahrain-Israel relationship to worsen. Speaking at the 10th emergency special session of the UN General Assembly on 1 November, Bahrain’s ambassador to the UN, Jamal Fares al-Ruwaei, warned about the risks that Israel’s bombing of Gaza could radicalise a new generation. “Such scenes of death and destruction can create entire generations filled with accumulated anger and thirst for vengeance,” he said.

The authorities in Manama will be watching closely in case future protests against Israeli actions include explicit challenges to the Bahrain regime itself.

Economic headwinds

On the economic front there have also been challenges. Italian energy major Eni recently pulled out of the offshore Block 1 licence it secured in May 2019. An exploratory well was drilled on the block in mid-2021.

Bahrain has also yet to make any significant progress on the Khaleej al-Bahrain offshore field, which was discovered in April 2018.

In a more positive development, a $7bn upgrade of the Bapco refinery is due to enable a ramp-up of production to about 380,000 barrels a day by mid-2024, which should bolster government revenues, though there have been some reports of delays.

Bahrain’s headline real GDP growth estimate for 2023 has meanwhile been curbed to 2.7 per cent in the latest update from the Washington-based IMF, down from an estimate of 3 per cent in April. This is down from an estimated 4.9 per cent growth in 2023 and comes amid an extension of Opec+ oil production cuts. Real GDP is forecast to rise back to 3.6 per cent in 2024.

Although high oil prices have bolstered the country’s fiscal position over the past two years, the government has also had to continue trimming public spending to bring its budget closer to balance. In 2023, Bahrain is running an estimated fiscal deficit of 5 per cent of GDP.

Capital Intelligence sovereign analyst, Dina Ennab, predicts the budget deficit will fall to 5 per cent of GDP in 2023, compared to 6.1 per cent in 2022. It could fall further, to 3.6 per cent of GDP by 2025, “provided the government continues to contain public spending and improves revenue mobilisation”, she wrote in a mid-October ratings review.

This is still a far larger deficit than the government has been aiming for. In early June, the government issued its two-year budget for 2023-24 and said it was targeting a deficit of less than 1 per cent of GDP in 2024.

Under the Fiscal Balance Programme launched in 2018, the government had initially aimed to balance its books by 2022, but the year before that deadline – and amid the Covid-19 pandemic and lower oil revenues in 2021 – it pushed the target date back to 2024.

The government’s forecast revenues of BD3.1bn ($8.2bn) in 2023 and BD3.5bn in 2024 are based on a conservative target of oil prices averaging $60 a barrel. The IMF estimates that the country will need an oil price of $108.3 a barrel to balance its budget this year, falling to $96.9 a barrel in 2024 – both figures are by far the highest in the GCC.

Should instability spread around the region, there could be the sort of spike in oil prices that would, in theory, bring the budget into balance, but the wider geopolitical and macroeconomic consequences would almost certainly be broadly negative for Bahrain and neighbouring countries.

Image: Sheikh Khalid bin Hamad attends Olympiad qualifier in Doha. Credit: Bahrain News Agency

https://image.digitalinsightresearch.in/uploads/NewsArticle/11276847/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Contractor wins $161m Meraas City Walk Crestlane deal

    7 September 2026

    Local contractor Parkway International Contracting has won a AED590m ($161m) contract to build phase three of the City Walk Crestlane project in Dubai’s Al-Wasl area.

    The contract covers the construction of four residential buildings comprising 394 apartments.

    Construction is expected to commence shortly, with completion slated for 2028.

    Local real estate developer Meraas, part of Dubai Holding, awarded the contract.

    In December last year, Meraas announced the next phases of the City Walk Crestlane project as it continues to expand its City Walk residential community in Dubai.

    City Walk Crestlane 4 and 5 comprise four residential towers offering 360 one- to five-bedroom units.

    In June 2025, Meraas announced the initial phases of the City Walk Crestlane project, which comprise two residential towers offering 198 one- to five-bedroom units.

    Earlier this year, Meraas awarded two major construction contracts worth AED2.4bn ($653m) to build 557 villas as part of the second phase of its residential community, The Acres, in Dubailand.

    The contracts were awarded to local construction firms United Engineering Construction (Unec) and GCC Contracting. Unec will build 371 three- to five-bedroom villas at The Acres, while GCC Contracting will deliver 186 five- to seven-bedroom residences at The Acres Estates.

    Meraas’ latest project contract awards in Dubai reflect heightened real estate activity in the UAE’s construction market. Schemes worth more than $323bn are in execution or planning stages, according to UK-based analytics firm GlobalData.

    The company forecasts that output from the UAE’s residential construction sector will grow by 3% in real terms between 2026 and 2029, supported by developments in infrastructure, energy and utilities, as well as residential construction projects.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19433882/main.jpg
    Yasir Iqbal
  • Six groups qualify for Saudi Arabia’s Qassim airport PPP

    7 September 2026

    Saudi Arabia’s Civil Aviation Holding Company (Matarat), through the National Centre for Privatisation & PPP (NCP), has qualified five groups and one standalone company to bid for a contract to develop Prince Naif Bin Abdulaziz International airport in Qassim, Saudi Arabia.

    These include:

    1. YDA Insaat / Safari Group / Lamar Holding / Egis (Turkiye/local/Bahrain/France)
    2. Ports Projects Management & Development Company / Algihaz Holding (local/local)
    3. Mada International Holding / TAV Airports Holding (local/Turkiye)
    4. Namaya International Investment Company / Oman Airports Management Company / AlBawani Capital / Tanama (local/Oman/local/UAE)
    5. Vision Invest / Asyad Holding / DAA International (local/local/Ireland)
    6. GMR Airports (India)

    The prequalification process follows 89 firms expressing interest in the contract, as MEED reported in March.

    The project scope includes the redevelopment of the passenger terminal as well as other associated facilities such as airside infrastructure, including runway, taxiways and aprons.

    The project will be developed on a design-finance-construction-operations-maintenance-transfer basis.

    The clients issued an expression of interest notice for the project on 9 February, and companies were given until 23 February to submit responses.

    Tendering is also ongoing for the new Taif International airport project in Mecca Province. 

    The new Taif International airport will be located 21 kilometres southeast of the existing Taif airport and will have a capacity of 2.5 million passengers by 2030.

    In addition to a new airport terminal, the proposed design features a runway with a full-length parallel taxiway connecting to a single commercial apron.

    The scope includes facility buildings, utility networks, car parks and access roads, as well as provisions for additional expansions to meet future subsystem requirements.

    The new airport is expected to meet the projected increase in demand by 2055 and contribute to the economic development of the city of Taif and its surrounding areas, in line with the kingdom’s National Aviation Strategy.

    It is also expected to meet the needs of Umrah pilgrims, as an alternative within the region’s multi-airport system, which includes King Abdulaziz airport in Jeddah, Prince Mohammed Bin Abdulaziz airport in Medina and Prince Abdulmohsen Bin Abdulaziz airport in Yanbu.

    Previous tenders

    The Taif, Hail and Qassim airport schemes were previously tendered and awarded as public-private partnership (PPP) projects using the build-transfer-operate (BTO) model.

    Saudi Arabia’s General Authority of Civil Aviation (Gaca) awarded the contracts to develop four airport PPP projects to two separate consortiums in 2017.

    A team of Turkiye’s TAV Airports and the local Al-Rajhi Holding Group won the 30-year concession agreement to build, transfer and operate airport passenger terminals in Yanbu, Qassim and Hail.

    A second team, comprising Lebanon’s Consolidated Contractors Company, Germany’s Munich Airport International and local firm Asyad Group, won the BTO contract to develop Taif International airport.

    However, these projects stalled following the restructuring of the kingdom’s aviation sector.

    Saudi Arabia has already privatised airports including the $1.2bn Prince Mohammed Bin Abdulaziz International airport in Medina, which was developed as a PPP and opened in 2015.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19433451/main.jpg
    Yasir Iqbal
  • Dubai sets October deadline for metro Gold Line

    7 September 2026

     

    Dubai’s Roads & Transport Authority (RTA) has set a deadline of 9 October for contractors to submit their prequalification statements for a contract to build the new Gold Line as part of the Dubai Metro network’s expansion.

    The previous deadline was 7 September.

    The RTA issued the request for qualification notice for the project in June, with an initial submission deadline of 17 August, as MEED exclusively reported.

    The prequalification notice followed the RTA’s invitation to contractors to express interest in building the new Gold Line in May.

    Dubai officially announced the launch of the new Gold Line in April.

    In a post on social media site X, Sheikh Mohammed Bin Rashid Al-Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, said the project will cost about AED34bn ($9.2bn).

    The Gold Line will increase Dubai Metro network’s total length by 35%.

    The project is scheduled for completion in September 2032.

    The Gold Line will be a fully underground network covering more than 42 kilometres, with 18 stations.

    It will pass through 15 areas in Dubai, benefiting 1.5 million residents.

    The project is expected to provide connectivity to over 55 under-construction real estate development projects.

    The Gold Line will start at Al-Ghubaiba in Bur Dubai and end at Jumeirah Golf Estates.

    It will connect to Dubai Metro’s existing Red and Green lines and integrate with the Etihad Rail passenger line.

    The contractor will be responsible for the design and build of all civil works, electromechanical equipment, rolling stock and rail systems.

    The selected contractor will also be required to assist in the systems maintenance and operations during an initial three-year period.

    In October last year, MEED exclusively reported that the RTA had selected US-based engineering firm Aecom to provide consultancy services for the Dubai Metro Gold Line project.

    Stage one covers concept design, stage two covers preliminary design, stage three covers the preparation of tender documents, stage four encompasses construction supervision, and stage five covers the defects and liability period.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19433246/main.png
    Yasir Iqbal
  • Oman power firms move closer to merger

    7 September 2026

    Oman’s Financial Services Authority has given in-principle approval for the proposed merger of Al-Suwadi Power Company and Al-Batinah Power Company.

    In a disclosure to the Muscat Stock Exchange on 6 September, Al-Suwadi said the proposed merger remains subject to legal and regulatory requirements as well as approvals from relevant lenders and shareholders of both companies.

    Al-Suwadi and Al-Batinah are independent power producers (IPPs) that operate two major gas-fired power plants in Oman. Al-Suwadi operates the 750MW Barka 3 IPP, while Al-Batinah operates the 750MW Sohar 2 IPP.

    The two companies began assessing a potential merger in May. Al-Suwadi said the companies have similar assets, business operations and founders.

    The companies recently secured new 15-year power purchase agreements (PPAs) with Nama Power & Water Procurement Company for Barka 3 and Sohar 2.

    The new PPAs will take effect on 1 April 2028 and run until 31 March 2043. They will allow the two plants to continue supplying electricity under long-term contracts after their existing PPAs expire.

    Al-Suwadi said in May that potential cost savings from a merger had been taken into account when the new PPAs were negotiated.

    The company has also started assessing potential refinancing options for its existing financing arrangements, as well as funding requirements for capital expenditure during the new PPA period.

    The refinancing assessment remains at an early stage. Any refinancing would be subject to approvals from the relevant regulatory authorities, existing lenders and Al-Suwadi’s board of directors.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19433240/main.jpg
    Mark Dowdall
  • Red Sea utilities project reaches commercial operation

    7 September 2026

    The utilities system serving Saudi Arabia’s Red Sea tourism destination has reached commercial operation, marking the start of a 25-year concession for one of the world’s largest integrated off-grid utilities projects.

    The Project Commercial Operation Date was signed by Marafiq Red Sea for Energy Company, the Acwa-led project company, and The Red Sea Utilities Company, a subsidiary of Red Sea Global.

    The milestone brings into commercial service an integrated system covering power, potable water, wastewater treatment, district cooling and waste management. The system operates without a connection to Saudi Arabia’s national grid and is powered by renewable energy.

    The project, known as the Marafiq Red Sea Project or Red Sea Utilities Multi-Utilities Project, combines 340MWac of solar photovoltaic capacity with a 1,227MWh battery energy storage system. Acwa describes the battery facility as the world’s largest off-grid battery installation.

    The system currently supplies Red Sea Global’s operational hotels, Red Sea International airport, logistics hub, electric fleet, staff village and community facilities.

    The solar and battery system has been sized to meet the destination’s initial energy demand and can generate up to 760,000MWh of clean electricity a year. At full capacity, it is expected to avoid about 600,000 tonnes of carbon dioxide emissions annually.

    The utilities scope also includes three seawater reverse osmosis plants, a sewage treatment plant (STP), a waste management centre and 32,500 refrigeration tonnes of district cooling capacity.

    The STP has a treatment capacity of 16,000 cubic metres a day. Treated wastewater will be used for irrigation and to support wetland habitats at the destination.

    The integrated system has been designed to expand as further phases of The Red Sea destination come online.

    As MEED previously reported, financial close was reached in February 2022, with about $1.33bn of senior debt facilities and total investment of about $1.84bn.

    The consortium comprises Acwa, China’s SPIC Huanghe Hydropower and Saudi Tabreed. Marafiq holds the 25-year utilities concession.

    Sepco 3, the Shandong Tiejun consortium, was the engineering, procurement and construction contractor. Acwa Operations is responsible for operating and maintaining the utilities system under a long-term agreement aligned with the concession period.

    The project is the first gigaproject in Saudi Arabia to bring its complete utility systems into commercial operation powered solely by renewable energy, Acwa said.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19432588/main.jpg
    Mark Dowdall