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Perspectives: Middle East affairs
313 Plays4 hours ago
Kim Ghattas, Middle East expert, author and journalist, joins Dr Helen Belopolsky, HSBC’s Global Head of Geopolitical Risk, for a discussion about the developments and trends changing the Middle East’s established status quo.
Kim shares her perspectives on strategic reforms and political rebalancing, the role of the US in the region, intra-regional dynamics, and ambitious economic diversification.
Watch or listen to understand more about the Middle East’s complexities, risks and opportunities.
This episode was recorded on the sidelines of the HSBC Global Investment Summit in Hong Kong on 26 March 2025. Find out more here: grp.hsbc/gis
Kim Ghattas is the author of Black Wave (2020), a New York Times Top 100 Notable Book.
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction: Host and Guest Introduction
00:00:05
Speaker
Welcome to Perspectives from HSBC. Thanks for joining us. And now on to today's show.
00:00:13
Speaker
Thanks for joining today's episode of our Perspective series. My name is Dr. Helen Belopolsky. I'm the global head of geopolitical risk at HSBC. This episode is being recorded behind the scenes of our Global Investment Summit in Hong Kong, where we're delighted to welcome our guest for today, Kim Gaddis.
00:00:35
Speaker
Kim is an award-winning journalist, author, and strategic advisor on geopolitics. She has more than 20 years experience in the Middle East, international affairs and US foreign policy. She is a renowned expert on the region, having covered the Middle East for the BBC and Financial Times. And if that wasn't enough, she is the author of Black Wave, a New York Times bestseller. Kim, thank you so much for being with us today. Thanks for having me,
Middle East: Investment Opportunities and Risks
00:01:06
Speaker
Helen.
00:01:06
Speaker
Now, today's conversation is about the Middle East. The Middle East has become a major destination for investors given the strategic reforms, natural resources, but also the ambitious economic diversification plans.
00:01:22
Speaker
Kim, as we look at the Middle East, we also see multiple shifts and a rebalancing in the politics of the region. The Middle East is in the state of flux. Would you agree ah that the established status quo politically is changing?
00:01:41
Speaker
Absolutely. Thanks for having me, Helen. It's great to be with you on this podcast and it's great to to be at the HSBC conference. The Middle East is a fascinating region. It is full of high rewards, but also high risks.
00:01:54
Speaker
And for investors, it's all about being able to weigh those two.
Iranian Axis Weakening: Risks and Opportunities
00:01:59
Speaker
Where is the opportunity for the long term investment? Where are the short term risks and where are the long term risks? And it's quite a complex um image that you that you end up with.
00:02:11
Speaker
Over the last 15 months, I think two particular trends have been upended. And the status quo is therefore also upended. And those two are also interconnected. So the first one is the dramatic weakening of the Iranian axis, as we call it. So Iran...
00:02:35
Speaker
a major power in the region, not at the same level as Saudi Arabia or the UAE or Egypt, but a major power in the sense that it has had and probably still has some ability to spoil other people's plans.
00:02:52
Speaker
And that is therefore a risk for investors, whether it's the nuclear program, missiles and um proxy militias like Hezbollah and Hamas. And over the last 15 months, we've seen Iran's 40-year-long policy of using proxy militias in the Middle East and using countries like Iraq, Syria, Lebanon and Yemen as forward defense bases to keep, quote-unquote, the enemy occupied far away from
Israel's Strategic Shifts Post-2024
00:03:22
Speaker
Tehran.
00:03:22
Speaker
the enemy in Iran's eyes being the US and Israel. That policy has to a large extent now been exposed as um not working anymore for Iran. It has been taken away from them in the aftermath of the Hamas massacre of October 7th against Israelis.
00:03:45
Speaker
Iran suddenly was facing the limits of that policy that it has developed and really um ah perfected over 40 years since the 1979 Islamic Revolution.
00:04:01
Speaker
And it has now ah really it It is going to have a very difficult time rethinking how it operates in the region, particularly as, and I know we'll come to this in the conversation, as Trump has set his sights on how to increase maximum pressure on Iran and weaken it to the point that either you get to a new kind of nuclear deal or other deal, or potentially we're looking at renewed strikes against Iran.
Predicting Chaos in 2025: Misaligned Agendas
00:04:28
Speaker
The other trend that has changed is Israel's mindset. And Israel's mindset in the aftermath of October 7th was really one of trauma,
00:04:42
Speaker
understandably, and choosing to go for military intervention, both in Gaza, but also in Lebanon. And now over ah over the last year, over the summer of 2024, we saw direct military strikes between Iran and Israel, first time in their history.
00:05:00
Speaker
And we've seen since the fall of Bashar al-Assad in Syria in December, we've seen Israel take territory in Syria, take the long coveted Mount Hermon in Syria, which gives them visibility over Syria and over Lebanon.
00:05:15
Speaker
They've exp expanded their buffer zone. They are moving again militarily inside Gaza and in Lebanon they're continuing despite the ceasefire to ah continue with military strikes against targets in Lebanon.
00:05:30
Speaker
So you have an ascendant Israel that has really reestablished deterrence that has had some strategic military gains.
00:05:41
Speaker
You know I say this from a purely sort of analytical perspective and you have an Iran that is weakened. So Kim, just based on those two trends that you identified, do you see the region being less or more stable?
00:05:54
Speaker
I think 2025 is going to be chaotic because
00:06:01
Speaker
But players' different agendas are not aligning yet. Iran feels weak but doesn't want to negotiate under pressure with Trump, but they're going to have to because they don't, they just don't have the upper hand.
00:06:13
Speaker
You have Trump, ah President Trump's plan for Gaza, the Gaza Riviera, which just doesn't fly with any of the Arab countries and certainly not with the Palestinians. The Arab League plan um is valid in many ways.
00:06:27
Speaker
It doesn't have enough guarantees for Israel about how to ensure that Hamas does not rise again in in Gaza. But it has some very solid proposals that are counter proposal to what President Trump is suggesting that would allow the Palestinians to stay in Gaza while it is being
Saudi-Iran Détente and Vision 2030
00:06:48
Speaker
rebuilt. I don't know how workable it is.
00:06:51
Speaker
And then you have Israel in this mindset that is somewhat expansionary and that is going to clash. with other Arab countries. So that sets us up for some some chaos and some turbulent times.
00:07:08
Speaker
And of course, the biggest concern is Iran's nuclear program. As it feels cornered and under pressure, having lost some of its cards and leverage through the loss of Hezbollah and Hamas and others, is it going to accelerate its nuclear program as leverage, knowing that that could also accelerate strikes um against it.
00:07:31
Speaker
But I don't want to paint only a doom and gloom picture ah because there are ah real opportunities. Now, just turning to your first book, which was groundbreaking, Black Wave really crystallized the the rivalry between Saudi Arabia and Iran, which ah evolved the the order and in the region.
00:07:57
Speaker
How do you see the relationship between Saudi Arabia and Iran evolving in the next few years? So Black Wave charts how Saudi Arabia and Iran became rivals and how that changed the region from a social, cultural and religious perspective. So it's grounded in the geopolitics of how that rivalry unfolded after 1979, because we need to remind your listeners that before 1979,
00:08:30
Speaker
Iran and Saudi Arabia were friendly rivals. They were allies that were competing, you know, just like other powers in the region or in Europe or or elsewhere.
00:08:41
Speaker
And 1979 is really what triggered the rivalry because Khomeini wanted to become not just the leader of Iran, not just the leaders of Shias, but the leaders of all Muslims around the world.
00:08:52
Speaker
And in the times that we're living in today, I just want to make that quick point before answering your question. What I explore over the course of the book is how the region changed over time.
00:09:05
Speaker
Slowly, gradually, norms and values were changed and eroded, and it took people quite some time to realize the extent of the transformation.
00:09:17
Speaker
Saudi Arabia, after having a first few years under King Salman and Crown Prince Salman that were quite Rocky, where Mohammed bin Salman really wanted to establish himself as you know a powerful leader in the region, launching a war against Yemen for, you know you could say, justifiable reasons or or not. But he did that, you know imposing ah an embargo on Qatar, which you know really roiled the Gulf and must must have been quite difficult to navigate for.
00:09:45
Speaker
ah for investors and and and others has now sort of matured in his approach to foreign policy and playing quite a deft game, I think, in the region.
00:09:56
Speaker
And that starts with going for a detente with Iran in 2023, March 2023, a detente which was absolutely essential to protect his ability to focus, Hamad bin Salman's ability to focus on Vision 2030.
00:10:13
Speaker
because the tension was rising so much again between Saudi Arabia and Iran. And we had seen some strikes by the Iranians via proxies against oil fields in Abqaik, for example, in in Saudi Arabia, but also against the UAE.
00:10:27
Speaker
The Houthis still using missiles. And Saudi Arabia just decided that it needed to pull the rug under those efforts. And it went for detente with Iran. And Iran was also feeling a lot of pressure, so it was convenient for Iran as well.
Critiquing Trump’s Middle East Strategy
00:10:44
Speaker
And I suspect that the Saudis will want to maintain that and make sure that they keep their rival on their good side. You know, you keep your friends close and your enemies closer. And I think that is very much the vision that Saudi Arabia has at the moment. And for Iran, I think that just as Russia would like to take Ukraine out of the European orbit, out of the NATO orbit, with the help of Iran, because these these two crises overlap on Iran and Saudi Arabia.
00:11:16
Speaker
Iran in the region is trying to make sure that Israel it doesn't enter the Arab orbit and it wants to interdict further normalization deals between Israel and its Arab neighbors, namely Saudi Arabia. So you have these real sort of clashing visions for what is the future of the region.
00:11:38
Speaker
You've mentioned President Trump quite a bit over the course of the past few minutes. Just curious about how you see his perspective. Does he have a strategy for the region?
00:11:48
Speaker
What does it tell us about the evolving role of the international system, given how prevalent him and Mr. Whitcoff have been in negotiations? President Trump has a lot of ideas, and when one doesn't work, he goes to the next one, even if they're in direct contradiction.
00:12:06
Speaker
I worry that we're going to see chaos in the region also because some of these plans are not well thought out. And when you're making policy, you really need to have well thought out plan. You need to game it out. How are all the players going to react? I mean, you know, whether you're an investor or a policymaker or you're doing acquisitions, you need to understand the mentality of all the players. What
Iran’s Pressures and Trump Administration Concerns
00:12:32
Speaker
is workable? What is not?
00:12:34
Speaker
um What's the backup plan? What are your contingencies and where are the risks? And I think President Trump is just coming up with these grand ideas. You know, Gaza Riviera sounds great, but it's not a business deal. It's not a real estate deal. There are human beings.
00:12:49
Speaker
I guess he didn't ask the other stakeholders, Saudi Arabia, the UAE, Egypt, Jordan, what did they think about it? So to construct any kind of vision, you really need those that that that bandwidth, that planning, um and the nitty gritty knowledge of the details. And I think that is lacking.
00:13:08
Speaker
at the moment in how the Trump administration is approaching the Middle East. And now, you know, we'll talk about Iran still, I'm sure, you know, they want to deal with Iran. So they want to put maximum pressure on Iran, and they want to try to get some kind of nuclear deal.
00:13:26
Speaker
The contours of that are very vague. We don't know what Trump has has in mind. And the fear amongst many Iran hawks is that the obsession with getting a deal will lead to a weak, bad deal.
00:13:37
Speaker
Well, maybe that's that's a perfect segue into Iran. Do you anticipate a deal or do you anticipate a preemptive strike by Israel on Iran? It's challenging question. It is a very challenging question and I'm not trying to sort of, you know, um give you a cop out answer.
00:13:56
Speaker
But I think this is really something that we're going to have to watch week by week, month by month, because as I said earlier, Iran is at its weakest.
00:14:10
Speaker
It wants to negotiate, but it's just not going to give up all its leverage. um Iran maintained some air superiority over Iraq at the time. It's an interesting hypothetical um scenario.
00:14:25
Speaker
So today, you know is Israel going to carry out a preventive strike against Iran's nuclear capabilities? It's possible. I think it's you know it's it's definitely a possibility. I think it depends on how President Trump negotiates that if they get to a deal, what are the details?
00:14:46
Speaker
What is the trust but verify? What is the IAEA role? What do the r other Arab countries think of it? The UAE is positioning itself as the interlocutor on on this one, just like Saudi Arabia is the host for the Ukraine-Russia crisis or war talks, the UAE is likely to be the negotiator or the host at least for those U.S.-Iran talks. But Iran is not going to give up its nuclear program without some solid guarantees.
00:15:21
Speaker
And would you really agree believe President Trump's guarantees
UAE-Saudi Relationship: Competition and Cooperation
00:15:26
Speaker
at the moment? I think it's going to be a ah difficult, you know, difficult square to to circle.
00:15:33
Speaker
But I want to add one more point. I think that Iran could agree to a two-state solution if Israel would make that move.
00:15:47
Speaker
And that's something that is an opportunity that was missed in the aftermath of October 7th. I think Iran was ready to agree to a lot for the sake of survival. And we've missed that opportunity. And I know I will, you know, a lot of people say, no, that's not possible. Iran wants to eradicate Israel.
00:16:03
Speaker
I think they're much more pragmatic than that. And you've touched on the Gulf, the UAE and Saudi. Be curious to know what you think. There's been a lot of speculation about friction between UAE and Saudi over the years.
00:16:18
Speaker
Some of that has been tempered over the course of the past couple of years. Where do you see the relationship between the UAE and Saudi going? over the course of the next few years? So as one UAE diplomat told me when I was visiting recently, you know, Big Brother has woken up.
00:16:34
Speaker
Saudi Arabia, Big Brother. You know, UAE lives kind of under the shadow of Big Brother. But also UAE is far more advanced in diversifying its economy, in attracting you know foreign direct investment, in being a massive hub for travel through Dubai Airport, 83 billion ah passengers a year, I think 12 billion billion of foreign direct investment in 2020 in 2023.
00:17:01
Speaker
You know, it's a big market. It's very attractive. It's very ah easy to operate in in the UAE. And so, Turkey is trying to catch up with that. And Mohammed bin Salman has made huge progress over the last few years as he tries to take his country into the 21st century because it was really lagging behind. you know I've covered Saudi Arabia since 2003 and I've seen the transformation very rapidly over the last five five years with you know some definite downsides when it comes to political expression and oppression. But I think that these two countries, Saudi Arabia and the UAE, have a lot of
00:17:43
Speaker
ah divergences and a lot of competition between them. But that is the kind of competition that also drives growth and investment. I mean, there's a lot of opportunity there.
00:17:55
Speaker
It's a healthy competition when it comes to the economic level. you know So Arabia wants to outdo bue It also wants to become ah hub of travel, you know, um over 100 million passengers by 2030. They've attracted 500 big large companies setting up their headquarters in um in in Saudi Arabia.
00:18:16
Speaker
On the other hand, the UAE is much more advanced in the services that it provides and the lifestyle that it provides. But I think it's healthy competition. I think it drives growth and investment. But there is political rivalry.
00:18:29
Speaker
um We're sitting in Asia at the moment. We've seen a huge increase in the corridor between Asia and the Middle East over the course of the past few years.
US and China: Influence in the Middle East
00:18:39
Speaker
Curious as to whether you think October the 7th and the return of Trump might actually alter the pivot to Asia.
00:18:48
Speaker
You mean back to the Middle East? Well, the Middle East, um back to to the U.S. The U.S. never left the Middle East. China is very much there as a commercial partner, as an investment partner, as a host of you know ah to finalize you know entente agreements between Iran and and Saudi Arabia.
00:19:10
Speaker
But I don't see China having a real political role. I don't think they want a political role at the moment, and they don't have the leverage neither over Iran nor really over Israel, you know which is interesting. you know Israel, America's closest ally, Iran, America's foe, they don't really have the leverage.
00:19:30
Speaker
They can guarantee, they can be the guarantor to some extent of the detente agreement between Iran and Saudi Arabia. Iran doesn't want to upset China either. But China doesn't have that kind of leverage yet and in the Middle East.
00:19:45
Speaker
And I know that I've said as well in our conversation that local regional actors are kind of driving the momentum in the region, Saudi Arabia, Turkey, Israel, Iran, but the U.S. still plays a central role and I don't see that being replaced yet, if only because of you know armament, you know weapons.
00:20:06
Speaker
you know Israel is a key buyer of American armaments. you know Saudi Arabia wants that as well. The defense industry in the U.S. you know, kept going in part also by a large part by by the Middle East.
00:20:18
Speaker
So I don't think that is going to that is going to change. And there is, you know, an ingrained culture in the Middle East, perhaps more so than in other parts of the world to say, what does America want? What does America think? well What should we do about America? What should we say to America?
00:20:34
Speaker
And I just I don't think that that will change. I do think that the The American pivot to Asia keeps being thwarted by crises in the Middle East.
00:20:47
Speaker
The Biden administration wanted to pivot to to Asia, was working very hard on it. And then October 7th happened, a month after Jake Sullivan, the national security adviser, said the Middle East has never been more stable.
00:21:01
Speaker
famous last words, really. I mean, you you should never predict that the Middle East is going to get boring or stable.
Economic Opportunities in Lebanon, Syria, and Iraq
00:21:08
Speaker
And that brings me to the, again, to the issue of the the Palestinian state.
00:21:13
Speaker
Having a Palestinian state or a promise of a Palestinian political horizon or a horizon a political horizon for the Palestinians isn't going to resolve all of the Middle East's problems, right?
00:21:24
Speaker
It is not going to resolve um tensions between Turkey and Israel. It is not going to um you know put to bed our concerns about Ahmad al-Sharaa's real intention. It is not going to resolve the corruption in Egypt. It is not going to resolve ah the dictatorship tendencies of Khais Saidi.
00:21:44
Speaker
But it's going to remove a key irritant. a real element that aggravates everything. Kim, one final question and hoping to end on a bit of optimism or hope. You've mentioned opportunities a number of times.
00:22:01
Speaker
Who are the economic winners? Where are the opportunities in the Middle East? yeah I would love to say that the opportunities are you know in my own country, Lebanon. Maybe some good real estate is there to be had.
00:22:12
Speaker
um you know the the The tourism industry is going to start booming again. But you know the the pound has devalued so much. I guess that does bring opportunities. You can still buy assets cheaply, but you need to have a long-term risk tolerance.
00:22:29
Speaker
The debt in Lebanon is is massive. We still don't know how it's going to be restructured. It all depends on the new central bank governor, what his vision is, whether we're going to get you know an IMF plan, etc.
00:22:44
Speaker
And in in in Syria, I think i think Syria is a is a great test case of how you rebuild after conflict. And so while it is perhaps not necessarily an immediate opportunity, it is one that investors need to watch. It's a small market, but it's a big reconstruction project, a bit like Gaza, right estimated at $56 billion, dollars according to the Arab League plan. So there are opportunities there. Some of them are small, but some of them are potential long-term, you know good sort of down payments for longer-term investments. I mean,
00:23:18
Speaker
CMA, CGM is very busy, including and in in Syria, so they can see the vision, the opportunity. um you know If I were an investor, I'd be worried about ah some countries where the political climate is you know difficult, uncertain, too much debt, too much spending on big you know vanity projects.
00:23:38
Speaker
you know i would I would stay away from those. But the Gulf is, you know um i think, is the big is the big opportunity. And Iraq. I would say Iraq is an underestimated market. It comes with its risks as well. It has been very close to Iran. It relies on China a lot, but I think there's a lot of room there.
00:23:55
Speaker
As Iraq tries to peel itself away from Iran to some extent and sort of, you know, play really quiet so it doesn't get caught in the crossfire, I think there are some big opportunities there. It's a big market.
00:24:08
Speaker
It's undertapped. um Oil, electricity, infrastructure, tourism, I think that's that's a big one. ah huge thank you Kim for your candor for your knowledge and it's helping us understand navigate some of the complexities but also identify the opportunities in the Middle East thank you thanks for having me great to be with you thank you for joining us for this episode of perspectives make sure you're subscribed to HSBC global viewpoint to stay connected