The New Middle East: Changing Mentality

That is U.S. President Donald Trump's vision for the Middle East as he articulated it during his visit to the Gulf last month.

Other presidents have, of course, expressed the same sentiments, but that had little impact on the region, which has long been beset by unusually high levels of war and terrorism, while doing very little business. Is there any reason to believe Trump will succeed where others have failed?

Perhaps. And that is not so much because Trump is such an extraordinary visionary or that he follows through on policies. Rather, it is because the time may have finally arrived when the Middle East undertakes a grand pivot away from conflict and towards commerce.

After decades of chronic political and military upheaval, it sounds improbable, but such a transition isn't unprecedented. Asia in the 1950s and 1960s was similarly bedeviled by war and violence, whether it was Mao Zedong's Cultural Revolution, wars in Korea and Vietnam, and a host of brutally repressive regimes. By the 1980s, many of these same countries were already in the midst of a breakneck pace of economic development that continues to this day.

In the Middle East, a change in mentality began taking root in the Gulf two decades ago. It was manifested in a clutch of "vision" plans that aim to leverage the vast oil profits generated by countries like Saudi Arabia, the United Arab Emirates and Qatar, in particular, to transform their economies into centers of high-tech, financial services, sports and entertainment and other industries.

Trump visited the region in May to do arms deals of the kind that characterized the old, war-prone Middle East, but there were other deals that were just as important and more telling of where Crown Prince Muhammad bin Salman, Saudi Arabia's effective ruler, wants to take his country: tens of billions of dollars in artificial intelligence and other tech deals, including the purchase of cutting-edge U.S. chips and the development of world-class data centers the kingdom needs to become a world AI power.The story was repeated when Trump made calls on the UAE and Qatar.

Syria and Lebanon cannot begin to compare to the glittering economies of the Gulf with their stable governments and money to spend, but there are early signs that they are making the same mental leap from conflict to commerce after years of destructive war.

The proximate cause is the wars Israel waged against Hezbollah and Iran in the wake of Hamas' October 7 attack.

Freed to deal with the West

In Lebanon, Hezbollah is all but defeated and no longer controls the government in Beirut. Its armed presence in the south of the country is gradually being dismantled, and Iran's baleful influence has been eliminated.

When Lebanon suffered one of the world's worst economic crises ever in 2019, the International Monetary Fund offered to grant the country badly needed loans. But the country's corrupt leadership refused to undertake the reforms that the IMF demanded in return. No longer beholden to Hezbollah, Lebanon's new leaders, Prime Minister Nawaf Salam and President Joseph Aoun, are free to deal with the West and get serious about economic reforms. As a result, talks with the IMF have resumed, and an agreement should be reached within months after Lebanon an all-encompassing reform package is approved.

Make no mistake, Salam and Aoun aren't brash reformers in the mode of Muhammad Bin Salman and other Gulf leaders. They are a part of Lebanon's old guard, but they appear to be more responsible than most of their peers and, with Hezbollah reined in, they are freer to act in the country's best interests.

And, whenever they may be tempted to backtrack, the United States, Saudi Arabia and the IMF are offering unprecedented carrots and sticks to push them into undertaking economic restructuring. As one lawmaker told The Financial Times after the National Assembly in April approved the banking secrecy reforms, a key step in fighting Lebanon's endemic corruption: "The big elephants in the room were the IMF and Yazid and Ortagus." She was referring to the Saudi and American envoys Yazid bin Farhan and Morgan Ortagus.

In Syria, many of the same dynamics are at work. With the fall of the Assad regime, Iran is no longer in the picture, and the vacuum is being filled by the U.S. and Gulf powers.

While he was making deals in Riyadh last month as part of his new Middle East policies, Trump also lifted most sanctions on Syria, and last week reopened the U.S. Embassy in Damascus. Europe has done the same. This alone will have far-reaching consequences by unfreezing Syria's overseas assets, enabling multinationals to do business in the country and giving Damascus access to global financial markets.

Syria's new leader, Ahmad al-Sharaa, remains an enigma. Is he an unreconstructed jihadist or a man determined to bring unity, stability and prosperity to his country by leading a historic shift away from Iran and Russia and to the Western and Gulf powers? The signs are heavily in favor of the latter. Much of the new regime's economic policies have yet to be fully articulated, much less implemented. But al-Shaara's government has made clear that it wants to take the kind of steps that used to be known as the "Washington consensus," namely, adopting policies of liberalization, privatization and deregulation.

In an interview with The Financial Times in January, his foreign minister, Asaad Al-Shaibani, said Syria planned to sell off state-owned ports and factories, attract foreign investment and boost international trade. "[Assad's] vision was that of a security state. Ours is of economic development," he said. "There needs to be law, and there need to be clear messages to open the way for foreign investors, and to encourage Syrian investors to return to Syria."

And where was Al-Shaibani when he gave the interview? At the World Economic Forum's annual Davos conference, a jamboree of the world's top business and economic leaders, and celebration of neo-liberal capitalism. It was the first time a Syrian leader ever attended.

It is by no means certain that the two countries will smoothly make the transition from conflict to capitalism.

The Lebanese are far from unanimous in wanting to restructure the economy. The corrupt old guard remains a powerful force and is employing tools like spreading conspiracy theories against reformers and lawsuits to slow change, if not block it. Hezbollah is down but not out, nor is much of the old, corrupt political class.

The obstacles facing Syria are greater. Al-Sharaa has yet to gain a firm grip on Syria, as two major bouts of intercommunal violence and this week's rocket attack on Israel show. Even as he has sought to centralize control, his government and army are filled with Islamic extremists who see a Western-style consumer economy as a threat to faith.

Moreover, not everyone in the Middle East has signed on to the idea of a bright new future of peace and prosperity. The obvious outlier is Iran. But others are also not there, most notably Egypt and Iraq, while Libya and Yemen are struggling as failed states.

Unfortunately, the outliers include Israel. Prime Minister Benjamin Netanyahu remains in the grip of the trauma of October 7, seeing threats to Israeli security everywhere from Lebanon to Iran. It's unlikely that Israel will be establishing economic ties with either Syria or Lebanon anytime in the future, but rather than encouraging the two countries' efforts at stability and growth, Israel chooses to bomb and occupy them.

Finance Minister Bezalel Smotrich isn't even willing to normalize relations with Saudi Arabia, an economic prize that is doable even now, if the price is dialogue with the Palestinians or ending the Gaza war. Israel "won't commit suicide," he told The Economist this week.

It should be no surprise that al-Shaara got a meeting with the U.S. president in Riyadh last month while Netanyahu stayed at home. The Syrian leader has signed on to Trump's new Middle East, the Israeli leader has not.

David Rosenberg