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Brics tilts balance of regional interests

27 September 2023

 

With the extension of invitations to Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE to join the Brics group of major emerging economies – and the acceptance by the UAE – Middle East interests are represented within the bloc for the first time and could end up comprising a third of its total membership.

This potential shift in the geopolitical reorientation of Brics reflects two interests for the group. The first of these is the strategic nature of the Middle East, both in terms of energy and logistics. The second is the key role that Saudi Arabia and the UAE could play in challenging the dollar.

None of this is necessarily a hard sell. As it stands, Egypt, Saudi Arabia and the UAE have reserved, business-like and occasionally testy relations with the US and the EU, while Iran is alienated by sanctions. All four Middle East countries meanwhile have strong and expanding trade relations with China and India.

From the perspective of China, India and Russia, the Middle Eastern invitees to Brics are ripe targets for being drawn further away from the sphere of Western influence. Brics, as a collective of Brazil, Russia, India, China and South Africa, is already a counter of sorts to the G7 and aims to level the global playing field. 

The addition of six new members stands to not only increase the bloc’s leverage, but, in Saudi Arabia and the UAE, aims to add two countries that are also ambitious about raising their stature on the global stage.

Strategic partnership

In terms of economics, the proposed expansion of the Brics membership would increase the size of the bloc by about a tenth, adding markets responsible for $2.6tn in GDP and populated by 409 million people, as of 2021, according to the World Bank. This builds on an existing GDP of $27.3tn – $17.7tn of it from China alone – and a population of 3.6 billion people.

Of the invited countries, Saudi Arabia represents the largest single potential net gain for the group, with its economy valued at about twice that of existing member South Africa.

Trade ties are already extensive within the group. China and India are top trade partners for Iran, Saudi Arabia and the UAE, so the prospective new Brics membership is building upon a framework of already highly interconnected and integrated economic relationships.

China is the single-most important trading partner of Saudi Arabia, accounting for 17 per cent of the kingdom’s foreign trade, while India accounts for about 9 per cent. The UAE and Egypt are also top trading partners for the kingdom. 

Overall, this means that the new prospective line-up of the Brics bloc could potentially represent a sizeable proportion of Saudi Arabia’s total trade moving forward.

China, India and Saudi Arabia are similarly two of the UAE’s top trade partners, while China, India and the UAE are all among Iran’s top trade partners. China and Saudi Arabia are likewise major trade partners for Egypt.

Though the expansion may represent a fractional upscaling in terms of market volume and value, the broadening of the bloc to strategic players in the Middle East could have an outsized potential to strengthen its member states’ global influence and collective bargaining.

Not least is the addition of three key members of oil producers’ group Opec – Iran, Saudi Arabia and the UAE – and observer state Egypt, up from the single Opec+ party Russia. 

This stands to bring key energy producers into yet closer economic partnership with China and India, both major energy consumers. It could also be key to progressing the Brics ambition of loosening the hold of the dollar by transitioning major bilateral energy transactions conducted in dollars into other currencies.

Next steps

The UAE’s quick acceptance of the Brics invitation shows its enthusiasm for strategic advancement and the potential leverage that a more empowered bloc could represent. The country will nevertheless, like India, need to carefully balance its role in the group with its existing US partnership – perhaps more so than any of the other invitees.

The UAE’s agreements with China and India to trade in local currencies is already a major win for the bloc in its efforts to reduce reliance on the US dollar. The more ambitious proposal for a common Brics currency to counter dollar fluctuations remains complex and uncertain.

The likes of Saudi Arabia and the UAE do, however, have the financial clout and expertise to potentially place the Brics-established New Development Bank on firmer economic footing, improve its project management and help establish it as a more credible counterpart to the likes of the Washington-based IMF and the World Bank.

Much will hinge on which of the remaining invitees ultimately choose to join the bloc. 

Iran and Egypt are expected to swiftly follow the UAE in accepting. Saudi Arabia is still carefully weighing the invitation, cautious of the chilling effect that throwing in its lot too clearly with China could have on its US relationship. 

For both Saudi Arabia and the UAE to join Brics would be a major coup for the bloc and a momentous shift in global politics.

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John Bambridge

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  • GCC banks prove resilient amid turmoil

    27 July 2026

     

    Gulf banks are proving adept at navigating the economic and geopolitical turbulence that comes with operating in the region. These skills have come to the fore this year, as regional lenders draw on stable funding profiles and ample capital and liquidity buffers that protect them from near-term credit risks. 

    GCC banks’ fundamentals have proved remarkably resilient to the Iran-related turmoil, assuming the intensity of the February-April stage of the military conflict does not resume.

    There have not been any significant outflows of external funding. While anecdotal evidence suggests some depositors briefly moved funds out of the region at the start of the war, ratings agency S&P Global notes that their return reflects confidence that the war will prove short-lived.

    Funding strength

    Metrics for the early part of the year revealed a robust picture. Domestic deposits held up strongly in the first quarter of 2026, total GCC domestic deposits rising by 16.9% in year-on-year terms, compensating for the decline in interbank funding. 

    State-linked deposits grew at a particularly rapid pace, led by the UAE and Kuwait, which offset decelerating private-sector deposit growth in those countries. 

    Domestic deposits accelerated in April, a pointer to GCC governments’ proactive stances in shielding their banking systems from undue stress. The inflow of public deposits accelerated quite significantly in this period, although that pace will likely subside as conditions gradually normalise. 

    Such deposits continue to underpin GCC banks’ wider performances. “Funding and liquidity is generally a strength for the region. Government deposits typically make up 20%-30% of the banking sector deposits. That is really important as these are sticky deposits,” says Redmond Ramsdale, head of Middle East ratings at Fitch Ratings.

    Funding and liquidity is generally a strength for the region

    Gulf states’ heavy reliance on public sector and government-related deposits has proved valuable in the current environment, anchoring banks’ funding profiles and helping reduce potential risks.

    Fund outflows have not materialised to any significant degree. “We had some anecdotal evidence of funds being withdrawn, but they returned in the following weeks,” says Ramsdale.

    Solid fundamentals

    GCC banks entered the conflict period in strong shape. According to S&P, domestic private sector credit growth in the region remained robust in the first quarter – the annualised growth rate was 8% at the end of March. 

    Core capital buffers are about 15%-16% – higher still for the top lenders – ensuring total loss-absorbing capacity stays below 9% of equity. Regulatory ratios exceed relevant thresholds, providing a significant buffer, according to ratings agency Moody’s.

    “If you look at the whole region, the proportion of the lending book that is non-performing, on a weighted average basis, sits around 2%,” says Badis Shubailat, a senior analyst at Moody’s. 

    “Against this solid level of asset quality, you have a cushion of provisions for expected losses that more than covers the existing stock of problem loans, which provides a strong first line of defence.”

    Then, as a second line of defence, are core capital buffers that remain high by global standards, with levels around 15%-16%. Put together, this explains why the banks are sitting on comfortable positions in terms of loss-absorption capacity.

    At the end of Q1 2025, the top 45 GCC banks reported an average Tier 1 capital ratio of 17%, with coverage ratios of 155.8%, according to S&P. 

    “Credit losses are at historical lows of 50 basis points (bps) for the region, and there are very good provisioning buffers – all of which helps to mitigate the negative consequences of the expected asset quality deterioration,” says Tatjana Lescova, director and lead analyst at S&P.

    According to Shubailat, the fact that the conflict impact on GCC banks has not been as pronounced as on other sectors reflects that over the past three years – and until right before the conflict started – the region as a whole, and its banking systems, had demonstrated remarkable resilience. In contrast, major advanced economies were struggling with inflationary pressures and subdued economic growth. 

    “This was visible in Saudi Arabia and the UAE, the two largest economic diversification engines in the region, which happen to also represent more than two-thirds of total banking system assets,” says Shubailat.

    Limited exposure

    Gulf banks have also been helped by the fact that those economic sectors most impacted by conflict – tourism, hospitality, energy – do not generally form a large part of their collective loans books. 

    “There will be weaker performance of borrowers in the most obvious affected sectors like infrastructure, tourism, logistics, transport and real estate, but tourism is actually a pretty small exposure for the banks – less than 3% of loan books,” says Ramsdale. “There might be a bit of pressure on small and medium-sized enterprises (SMEs), which are less able to cope with the pressures than the larger corporates, but again, for banks, SME lending is not very big.” 

    Banks’ exposure to the real estate and construction sectors is highest in Qatar – 31% of total credit at the end of March – while the exposure in Kuwait stands at 25%, with Saudi Arabia at 16% and Bahrain at 12%, notes S&P. UAE banks have been consistently reducing their exposure to these sectors, down to 13% at the end of March, compared to 21% at year-end 2020. 

    Moody’s Shubailat says that developers in the UAE sit on solid balance sheets and strong revenue backlogs, while banks’ exposure to the construction sector has declined. “So the quantum is lower, the credit quality of the exposure is better, and the banks are sitting on higher capital and provisioning buffers,” he notes.

    Gulf bankers are not resting on their laurels. They know that even if bad loans have been limited, they cannot forestall the possibility of problem exposures further down the road. 

    “Asset quality deterioration is a risk that we expect to materialise later in the year. This is because of weaker macro expectations, and negative impact on some of the corporate sectors, albeit varying across different GCC countries,” says Lescova.

    On average, for the region, S&P expects 20 bps of increases in credit losses for this year. When it comes to asset quality, the regulatory forbearance measures announced by three central banks will help alleviate the impact.

    Policy support

    Central bank moves have added another layer of support. Forbearance measures from the UAE, Kuwait and Qatar central banks have allowed additional headroom.

    For example, in mid-March, the Central Bank of the UAE launched a five-pillar resilience package that relaxed capital buffer stipulations, representing more than $272bn in support. 

    Kuwait eased liquidity requirements, raised maximum lending limits and released a portion of the capital conservation buffer to expand refinancing and credit quality absorption capacity. Qatar, meanwhile, has cut the reserve requirement from 4.5% to 3.5% for deposits.

    Forbearance measures from the UAE, Kuwait and Qatar central banks have allowed additional headroom

    Such measures were not a response to a banking crisis, says Ramsdale. “Some of the support packages that we have seen coming out of the central banks, in the UAE, Qatar and Kuwait, were preventative support measures,” he says.

    “They were designed to boost confidence and limit that pass through from temporary deposit volatility. It was not to do with acute banking stress.”

    Market confidence

    Larger banks are better positioned to cope with straitened economic times. They are generally more geographically diversified beyond their domestic markets, and international operations have historically been a growth driver for them. 

    “When there is increased market uncertainty, larger banks may benefit from a flight-to-quality movement, with deposits moved away from smaller banks. Based on Q1 results, only a few smaller banks have reported a contraction in the customer deposits,” says Lescova.

    The GCC’s largest banks, including Al-Rajhi Banking & Investment Corporation, Saudi National Bank, First Abu Dhabi Bank, Qatar National Bank, Abu Dhabi Commercial Bank and Emirates NBD, remain highly profitable, although they may not perform as strongly as they would have had the conflict not occurred.

    “We already expected some softening in profitability before the conflict, because of the normalisation of the cost of risk upwards from incredibly low levels over the last three years, [which] were driven by a very strong recovery performance from the banks,” says Shubailat. 

    “In turn, this current situation adds a layer of pressure to the normalising profitability story by increasing provisioning needs in light of the recent economic shocks,” he adds.  

    Confidence in GCC banks was evident from the outset of the conflict. In early April, Emirates NBD priced a $750m AT1 capital issuance, the first international debt capital markets transaction by a GCC issuer since late February.

    “The first ceasefire saw things like private placements start happening again, and that slowly translated into the opening up of public markets. 

    “Emirates NBD was one of the first banks to open up that market, and we are seeing the largest banks issuing again,” says Ramsdale.

    The operating environment for Saudi Arabia is ranked BBB+ – a strong position, all things considered. Ramsdale notes that Riyadh’s reprioritisation of large projects associated with Vision 2030 “means growth will probably be slightly slower in Saudi Arabia”, but adds: “That is actually a good thing, because growth was so strong it was beginning to pressure funding, liquidity and capitalisation. 

    “Taking off some of that pressure is a positive for banks.”

    Growth prospects

    Stronger earnings performances will allow banks to bankroll mergers and acquisitions (M&A), building on inorganic routes to growth. Within the past year, the National Bank of Bahrain and Bank of Bahrain & Kuwait (BBK) have agreed to explore a merger, while BBK has also absorbed HSBC’s retail banking business.

    Emirates NBD is reported to be looking to acquire HSBC’s business in Turkiye, a country where the Dubai bank already has a presence through its takeover of DenizBank in 2019. It also grew its stake in India’s RBL Bank this year to 60%. 

    “Certainly the big banks will remain opportunistic over M&A – where the value comes at the right price, then they are interested. And if the big international banks are going to pull out, they tend to have some of the best-quality assets, so you can understand why regional players might be interested in them,” says Ramsdale.

    Such moves should provide reassurance that, despite recent challenges, GCC banks are well placed to ride out the remainder of 2026 and resume the positive trajectory  that was evident before the Iran war shook the region. 

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    Construction is expected to be completed by 2029.

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    27 July 2026

     

    Saudi Arabia’s principal buyer, Saudi Power Procurement Company (SPPC), has issued the request for proposals (RFP) for the second phase of its independent battery energy storage system (bess) projects in Saudi Arabia.

    The Group 2 programme comprises six independent storage provider (ISP) projects with a total capacity of 3GW, equivalent to 12,000 megawatt-hours based on a four-hour storage duration.

    According to a source, the RFP was issued earlier in July and developers have since submitted a first round of clarification requests to SPPC as they prepare their bids. 

    Developers have until October to submit proposals, the source said.

    The six bess projects include:

    • Samha bess ISP: 500MW (Qassim)
    • Al-Leeth bess ISP: 500MW (Mecca)
    • Al-Henakiyah bess ISP: 500MW (Medina)
    • Khulis bess ISP: 500MW (Mecca)
    • Sadawi bess ISP: 500MW (Eastern Province)
    • Ashyrah bess ISP: 500MW (Mecca)

    On 1 July, MEED reported that up to 27 firms had prequalified to participate in the second phase. SPPC previously received statements of qualification on 13 May.

    It is understood that Abu Dhabi National Energy Company (Masdar, UAE), Acwa (Saudi Arabia), EDF (France), Korea Electric Power Corporation (Kepco, South Korea), International Power (Engie, France) and Marubeni Corporation (Japan) are among the companies likely to make offers for the contracts.

    Winning bidders will hold 100% equity in a special purpose vehicle (SPV), with each SPV entering into a storage services agreement with SPPC as part of the independent storage provider structure. 

    The programme forms part of Saudi Arabia’s National Renewable Energy Programme (NREP) and supports the kingdom’s target of generating about 50% of its electricity from renewable energy by 2030. The projects will be developed under a build-own-operate model.

    US/India-based Synergy Consulting is advising SPPC on the energy storage Group 1 and Group 2 programme.

    Contracts are expected to be awarded for Group 1 Bess projects in the coming months, with both Acwa and Engie understood to be frontrunners for these contracts.

    Separately, SPPC has extended the deadline for developers bidding for four solar projects under round seven of the NREP, led and supervised by the Ministry of Energy.

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    The deadline for the two wind IPPs with a combined capacity of 2,200MW has been extended to 14 September.

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    It will serve traffic travelling from Al-Khail Road to Al-Asayel Street via Al-Wasl Club Street.

    The RTA said the project is 90% complete overall, with two tunnels scheduled to open in August.

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    The RTA awarded CCECC the AED600m ($163m) contract in October of that year.

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    Dubai Municipality received statements of qualification on 23 July from firms interested in delivering phase three of the Jebel Ali sewage treatment plant (STP) expansion project.

    Known as DS150/3, the project will be delivered under a public-private partnership (PPP) model on a design, build, finance, own, operate and transfer basis.

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    It is being procured through Dubai Municipality’s sewerage and recycled water projects department and will be delivered via a two-stage operational approach over a 30-year concession period.

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    • Taqa Water Solutions (UAE)
    • Veolia (France)

    The municipality issued a request for qualifications notice in May with an intial bid submission deadline of 18 June. UK-headquartered Deloitte is acting as financial adviser, Aecom is the project's technical adviser and CMS is the legal adviser.

    Dubai Municipality said the project will also include additional land uses and community-focused amenities as part of broader sustainability and urban integration objectives.

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    On 9 July, firms submitted bids for an engineering, procurement and construction contract covering the expansion of the Jebel Ali STP phases one and two.

    Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d, following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cm/d, with the expansion estimated to cost $300m.

    UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
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    Mark Dowdall