Meed | Foreign policy issues cloud Bahrain’s horizon

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

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Dominic Dudley

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Houthi escalation targets Saudi airports
12 October 2026

Yemen’s Houthis have placed Saudi Arabia’s civil aviation infrastructure at the centre of their campaign against the kingdom. Two strikes on King Khalid International airport in Riyadh over the weekend killed 13 people and injured 320.

The deadlier attack hit a passenger terminal on the afternoon of 10 October. The General Authority of Civil Aviation (Gaca) said it killed 12 people, including four Saudi citizens, and injured 309. Airport operations were suspended pending a damage assessment.

A second strike hit Terminal 4 on the afternoon of 11 October, sparking a fire that killed a Pakistani resident and injured 11 others, according to Gaca. The Saudi-led coalition reported intercepting a cruise missile near the airport that afternoon. Gaca also reported an attack on King Fahd International airport in Dammam that evening, following a coalition report of a projectile falling near the facility the previous night.

The weekend strikes followed attacks on Abha International airport on 6 October and on King Khalid International airport on 7 and 8 October, the last of which included a strike on a Saudia aircraft. Gaca figures put the toll from the week’s attacks on Saudi airports at 19 dead and more than 350 injured.

The Houthis said they would continue operations inside the kingdom and that all Saudi airports were potential targets, with the exception of those serving the holy cities. The group says it is acting in response to Riyadh’s support for Yemeni government forces and a Saudi air strike on Sanaa airport. It has also claimed attacks on Saudi oil facilities, which Saudi authorities have not confirmed.

Aviation exposure

The attacks strike a sector central to the kingdom’s diversification plans. King Khalid International airport’s existing terminals are to be absorbed into King Salman International airport (KSIA), a 57-square-kilometre development with six parallel runways targeting a capacity of 120 million passengers by 2030 and 185 million by 2050.

Procurement on KSIA has gathered pace this year. In July, a joint venture of China Civil Engineering Construction Corporation and Dammam-based Mofarreh AlHarbi & Partners won an estimated SR800m ($213m) contract for enabling and substructure works on Terminal 6, which will add capacity for 40 million passengers. Turkish contractor IC Ictas and Saudi Arabia’s Al-Rashid Trading & Contracting recently secured a SR800m ($213m) contract for the airport’s Private Aviation Terminal.

Government-owned Saudi Royal Aviation set 8 October as the bid deadline for an estimated SR3bn ($800m) contract to build an aviation complex within the KSIA masterplan, the same day the Houthis struck King Khalid International airport and a Saudia aircraft.

Airlines have already adjusted. Flydubai cancelled flights to Riyadh and Yanbu up to 10 October and to Abha up to 11 October, and Etihad Airways reported extended delays on its Abu Dhabi to Riyadh service after the airport closed on 8 October. The UK Foreign Office has advised against all travel to areas within 10km of the Yemeni border.

Market reaction

The Saudi stock market’s response has been muted so far. The Tadawul main index fell 15.54 points to close at 10,360.74 on 11 October, the first trading session after the Saturday attack, with turnover of SR2.6bn ($693m). The session closed before the second strike on King Khalid International airport and the attack on Dammam, and Monday’s trading will be the first to reflect the full weekend.

The weekend also brought a separate maritime incident. UK Maritime Trade Operations said an oil tanker was struck by an unidentified projectile in the Strait of Hormuz on 11 October, with its crew reported safe.

Diplomatic response

The coalition described the 10 October attack as a war crime and said it would respond decisively. It said on 10 October that it had destroyed 136 military targets in Houthi-controlled areas and was working to dismantle the group’s ballistic missile network.

Egypt, Pakistan and Turkiye joined Saudi Arabia in an R4 group statement condemning the attacks and supporting measures taken by the kingdom in response. The Arab League also voiced its support for Saudi Arabia. On 11 October, Iran’s foreign minister spoke by telephone with his Saudi counterpart, Prince Faisal Bin Farhan, to discuss the escalation. The US and UK have also signalled the possibility of further support for the kingdom.

The escalation comes against the backdrop of the regional conflict, which has drawn Saudi Arabia into a renewed Yemen front after several years of relative calm following the 2022 ceasefire. The extent of the damage at King Khalid International airport, which Gaca is still assessing, and the speed at which international carriers resume full schedules will determine how far the attacks disrupt the kingdom’s aviation programme.

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Colin Foreman
Egypt and Saudi Arabia sign oil and gas deal
12 October 2026

Egypt and Saudi Arabia have signed an agreement to strengthen cooperation in the oil, natural gas and petrochemicals sectors, according to a statement from Egypt’s Ministry of Petroleum & Mineral Resources.

The memorandum of understanding (MoU) was signed in Riyadh by Karim Badawi, Egypt’s minister of petroleum and mineral resources, and Abdulaziz Bin Salman, Saudi Arabia’s minister of energy.

Under the agreement, both sides will enhance cooperation in trading, transporting, storing and distributing crude oil, petroleum products and natural gas.

They will also expand cooperation on developing the infrastructure and logistics services that support these activities.

In its statement, Egypt’s Ministry of Petroleum & Mineral Resources said: “These efforts will contribute to improving energy market efficiency, enhancing the resilience and reliability of supply chains, and strengthening energy security.”

The MoU also provides for expanded cooperation in exchanging expertise and best practices in operating and developing fuel stations, as well as in transporting and tracking petroleum products and liquefied petroleum gas cylinders.

Additionally, the agreement seeks to explore investment opportunities in joint projects and promote exports.

The latest agreement comes as Egypt becomes an increasingly important export route for Saudi Arabia.

Due to disruptions and security risks affecting shipments through the Strait of Hormuz, Saudi Arabia has been redirecting crude exports via its East-West Pipeline to Yanbu on the Red Sea.

Meanwhile, the Bab El-Mandeb Strait, at the southern end of the Red Sea, has also become a security concern due to military activity in Yemen. Egypt offers an alternative route through the Sumed pipeline, which runs from Ain Sokhna on the Red Sea to Sidi Kerir on the Mediterranean.

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Wil Crisp
JGC yet to return evacuated workers to Basra refinery
12 October 2026
Japan’s JGC has yet to bring evacuated workers back to the Basra refinery project in Iraq, according to industry sources.

JGC evacuated its personnel from the site in the southern oil hub of Basra following the start of the regional conflict on 28 February, when the US and Israel attacked Iran.

The evacuation halted work on the project, which was in its final construction stage.

On 14 August 2026, Iraq’s Ministry of Oil announced that it had signed an agreement with JGC to resume work on the fluid catalytic cracking (FCC) project at Basra refinery.

One source said: “Even though the agreement to bring the evacuated workers back was signed about two months ago, there is still no sign of the evacuated workers on the project site.

“It is possible that they will return soon, but it is hard to tell what will happen next in the current security environment.”

Earlier this month, Iraq’s Ministry of Oil said it met with Japanese officials to discuss plans to commission the FCC unit under the Basra refinery upgrade project.

The statement did not say when the evacuated JGC workers would return to the project site.

Strategic project

Iraq’s state-owned South Refineries Company (SRC) sent JGC notice of the main contract award for the FCC package of the Basra refinery upgrade project in August 2020.

JGC was awarded the contract in consortium with South Korea’s Hyundai E&C.

The official contract signing ceremony was held in Baghdad on 1 October 2020.

The contract awarded to JGC, which uses the engineering, procurement, construction and commissioning model, was worth $3.78bn.

The FCC package is part of a broader project to upgrade the Basra refinery.

The project site is located about 12 kilometres east of Iraq’s southern city of Basra.

The wider upgrade project involves installing new facilities on land adjacent to the existing Basra refinery, including a vacuum distillation unit and a diesel desulphurisation unit.

In April 2021, France’s Axens won a contract in Iraq to provide four process technologies to SRC for the Basra refinery upgrade project.

The technologies that SRC selected are:
- Diesel hydrotreatment unit (Prime-D)
- Vacuum gasoil (VGO) hydrotreating unit
- VGO fluid catalytic cracker unit
- Oligomerisation unit (polynaphtha)
In addition, Axens is providing catalysts and adsorbents, proprietary equipment, training and technical services.

MEED’s latest report on Iraq includes:

> COMMENT: Iraq’s reform window narrows
> GOVERNMENT: Al-Zaidi takes Iraq’s premiership under US shadow
> BANKING: Financial challenge tests Iraq’s resolve
> ECONOMY: Iraq enters era of resilience, reform and rising risks
> OIL & GAS: Iraqi oil and gas sector in crisis
> POWER & WATER: Focus shifts to delivery of Iraq utilities expansion
> CONSTRUCTION: Momentum builds in Iraq’s post-war construction sector

To see previous issues of MEED Business Review, please click here
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Wil Crisp

Contractors prepare Jordan stadium prequalification

12 October 2026

Contractors are preparing to submit prequalification statements on 14 October for a contract to build Jordan’s Al-Hussein Bin Abdullah II International Stadium, located east of the capital, Amman.

The project is part of the first phase of the Amra City development masterplan and is being implemented by Jordan Cities & Facilities Development Company, a Jordan Investment Fund-owned company.

Main works are expected to begin early next year, with the stadium slated for completion in 2029.

The project will cover about 1 million square metres, and the stadium will seat 50,000 spectators.

The stadium is being built within the Amra City development, which is located about 40 kilometres (km) from downtown Amman and 35km from Zarqa and Queen Alia International airport.

MEED reported that preliminary excavation and site preparation began in June.

The project forms part of Jordan’s Economic Modernisation Vision (EMV) 2023-25.

The EMV – Amman’s flagship reform programme – aims to increase real income per capita by an average of 3% annually, create 1 million jobs and more than double the country’s GDP over the next decade.

The strategy envisages a leading role for the private sector, which is expected to account for 73% of the estimated $58.8bn investment required.

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

Industry and logistics drive development at Neom; Saudi Arabia’s investment priorities realign amid conflict; MEED’s 2026 power developer ranking.

Distributed to senior decision-makers in the region and around the world, the October 2026 edition of MEED Business Review includes:

> AGENDA: Oxagon takes centre stage at Neom

> MARKET FOCUS: Saudi projects hold steady

> INDUSTRY REPORT: MEED’s 2026 GCC power developer ranking

> POWER: AI is creating a grid capacity problem

> LEGAL: What IFAD’s wind-down means for Gulf commodity markets

> OIL: Oil companies focus on North Africa amid Hormuz crisis

> LEADERSHIP: The future city does not need to hang above the ground

To see previous issues of MEED Business Review, please click here

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Yasir Iqbal

Abu Dhabi plans Mussafah road upgrades

12 October 2026

Abu Dhabi’s Department of Municipalities and Transport (DMT) has announced plans to upgrade roads in Mussafah, improving links between the industrial area, Mohamed Bin Zayed City and Zayed City.

The scheme covers about 13 kilometres of roads on the E30 and 8th Street. It aims to reduce congestion, improve road safety and cut journey times.

The works include a new three-lane highway in each direction along 8th Street, with parallel three-lane service roads on both sides providing access to local businesses and facilities.

The upgraded corridor is expected to accommodate up to 4,000 vehicles an hour.

Other works include upgrades to four E30 interchanges, improved links to 8th Street and the E20, and modifications to nine junctions.

The DMT also plans to build two bridges connecting Mussafah and Mohamed Bin Zayed City, along with a pedestrian bridge.

Abu Dhabi is planning major investments to upgrade its road network across the emirate.

Last week, it disclosed plans for a major new transport corridor in the capital, comprising a 37km coastal route linking Al-Hudayriyat Island with the E11 at Al-Nouf.

It is planned to have three lanes in each direction and will include a tunnel, about 7km of marine bridges and about 4km of causeways.

The scheme will provide a direct connection between Al-Dhafra, Al-Hudayriyat Island and Abu Dhabi Island via Halat Al-Bahrani, Al-Futaisi and Al-Aryam islands.