As part of a broader trend of withdrawal from the Middle East, the Biden administration has significantly scaled back its use of economic diplomacy there. This action has numerous consequences: It has put US efforts to combat illicit finance around the world in jeopardy and created a void that US foes, especially China, are eager to fill.
Cooperation on sanctions, anti-money laundering, and countering the financing of terrorism (AML/CFT) has been a pillar of US relations with Middle Eastern nations, particularly those in the Gulf, for about 20 years. To detect and stop the financing of terrorism in the Middle East, succeeding US administrations made significant institutional capacity improvements during that time. The United States encouraged local law enforcement partners and financial regulators to follow international standards and best practices for AML/CFT by providing them with technical assistance. To establish long-lasting, productive partnerships in the region that could broaden the scope and influence of its own sanctions programs and AML/CFT initiatives, Washington has also supported efforts to strengthen the laws and enforcement practices required to combat financial crime.
Years of close cooperation turned out to be more than just a diplomatic gimmick when the US and Qatar jointly took action against a network of Hezbollah financiers, established a Gulf-wide coalition to formally formalize cooperation on countering terrorist financing, and collaborated with the Iraqi government to block access to the global financial system for leaders of the Islamic State of Iraq and al-Sham.
The US engagement—and consequently, US influence—is dwindling in the Middle East despite assurances from the Biden team to the contrary. The ongoing conflict between the United States and China and the war that Russia is waging in Ukraine have significantly altered the global playing field. Even on topics like AML/CFT and sanctions, which once dominated regional policy, Washington has limited resources to give Middle East policy priority. This geopolitical realignment has likely been reinforced by clumsy errors in judgment made by the current White House, such as US President Joe Biden's widely derided trip to Saudi Arabia last year.
Beijing is in the background.
Ironically, the Biden administration has left the Middle East's back door unguarded as it rebalances its strategic priorities to concentrate on allies in the Asia-Pacific region to counter China. China has filled the gap, building on its trade and investment-focused international playbook, but without the same dedication to global norms and standards surrounding counter-illicit finance that the United States requires of its allies. It's a development that threatens US national security interests while also further eroding US relations with the Middle East.
Most significantly, US geopolitical clout in the Middle East has been diminished by China's recent diplomatic outreach to the area. For instance, China mediated a deal in March in which longtime foes Saudi Arabia and Iran agreed to mend fences. Beijing's role in brokering the deal has raised its diplomatic profile in the region and sidelined Washington in the process, though it is still unclear how committed Riyadh and Tehran are to rapprochement in the long run.
As Saudi Arabia is one of the coalition's key members, the deal also has significant doubts about the Biden administration's ability to sustain a large enough coalition against Iran. The United States will continue to rely on sanctions to try to pressure change in Tehran as there are no signs of progress in negotiations to reenter the historic Iran nuclear agreement. However, as isolating Iran from the global economy becomes more challenging, China's diplomatic rise—and its participation in these negotiations—may weaken the effectiveness of US sanctions on Iran.
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