The benefits of checkbook diplomacy

Saudi Arabia and Qatar last week declared that they would settle Syria’s debt to the World Bank of $15 million. This policy can be regarded as checkbook diplomacy: but what is this and how is it relevant to international politics and Syria in particular?

Checkbook diplomacy came to prominence during the first Gulf War, when Kuwait was invaded by Saddam Hussein. Many states offered military support, but as the constitutions of others did not permit this, they instead sent money to support the effort to liberate the country. Japan and Germany exemplified this newly articulated checkbook diplomacy, which is also known as dollar diplomacy. Nowadays, great powers such as China and the US are effectively continuing the application of such measures for global influence.

In 2023, energy and environment reporter Christina Lu, writing in Foreign Policy, expressed her view that China had risen to become the developing world’s bank of choice, “putting hundreds of billions of dollars in loans into global infrastructure projects as part of its sprawling Belt and Road Initiative.”

More recently, Arman Sidhu of Geopolitical Monitor, in a piece titled “Sovereign Wealth as Soft Power: Checkbook Diplomacy in the Trump Era,” argued last month that sovereign wealth funds are increasingly being applied as geopolitical instruments of alliance-building and economic warfare within elites and states. As an example of this, US President Donald Trump in February signed an executive order directing the Departments of Treasury and Commerce to develop a plan for a US sovereign wealth fund. The executive order offered no operational direction but motioned the administration’s aim to apply the fund as a tool of global influence and economic leverage.

Arguably, the countries where checkbook diplomacy began are located on the Arabian Peninsula (given the earliest links to Kuwait) and they have effectively learned the wisdom and importance of this type of diplomacy, developing it through several mechanisms. A distinctive feature is the already well-established function of sovereign wealth funds, such as Saudi Arabia’s Public Investment Fund. This emerged as the key player in the Kingdom’s diversification efforts and it was last year named as the No. 1 sovereign wealth fund brand by Brand Finance.

Meanwhile, the Qatar Investment Authority prioritizes investments in Europe, such as in the fields of finance, estate and renewables, but it also invests in global giants, such as Porsche, Volkswagen, Barclays and Credit Suisse. However, as the former CEO of the authority stated in 2023, “a larger share of our investments will be going to (Asia and the US), given the opportunities we see in the US and places like China and India.” In addition to securing the giant wealth of oil-rich countries, these mechanisms are masterpieces of checkbook diplomacy, with the Gulf countries significantly benefiting diplomatically by projecting indirect soft power toward external powers.

The Gulf countries significantly benefit diplomatically by projecting indirect soft power toward external powers.

Dr. Diana Galeeva

Moreover, patience tends to bring victory to these “checkbookers,” as can be seen in the Middle East’s dynamics; it has opened up direct opportunities for former regional heavyweight Syria. Saudi Arabia and Qatar paid off its debt to the World Bank as the new government in Damascus aims to reconstruct the economy after the war. These two Gulf countries have been key backers of Syria’s new leadership, which came to power last December after the fall of Bashar Assad.

The UN predicted in 2017 that the reconstruction of Syria would cost $250 billion. According to a joint statement issued by Saudi Arabia and Qatar last week, their payment of Syria’s arrears “will pave the way for the World Bank Group to resume support and operations in Syria after a suspension of more than 14 years.” It will also offer the new Syrian government access to funds and other technical support as it seeks to rebuild the country’s institutions.

This decision came after Syria’s central bank governor and finance minister participated in the International Monetary Fund and World Bank Spring Meetings. Qatar had previously relied on checkbook diplomacy, as in March it started to supply Syria with natural gas via Jordan in a bid to ease electricity cuts in the country.

One of the difficulties is the remaining Western sanctions on Syria, which were imposed on Assad’s government. However, the US eased some restrictions in January by issuing a general license that approves key transactions with the Syrian government, including energy sales. The EU has also started to ease some restrictions, from transport to energy and banking. And the UK government has eased its sanctions against many Syrian institutions.

As Saudi Arabia and Qatar’s checkbook diplomacy has brought positive results for their diplomatic efforts with European countries, it is worth considering whether these strong ties could further boost both Gulf nations’ efforts to reconstruct and impact the future of Syria. Clearly, Gulf money will have a significant impact on the future prosperity of Syria. Since the so-called Arab Spring, there have been many discussions in academic literature on the Gulf countries’ role as regional powers and even consideration of them as influential global players. The end of the Syrian civil war further proves this thesis, with increasing influence for the Gulf’s small and middle powers — as they are normally perceived in international affairs — in financially supporting and directing one of the Middle East’s previous heavyweights.

Broadly speaking, checkbook diplomacy has emerged as a key and widespread strategy. We can see its role in the transformation of China into a great power, based on its economic resources. Trump’s America is also taking this direction, perhaps increasingly once the Ukraine war has been settled, leading to a neutralization of the geopolitical landscape. And in how the Gulf monarchies, especially Saudi Arabia, Qatar and the UAE, have emerged as influential regional actors with a growing global role.

Wars that rely on hard power might bring victories, but at the cost of massive destruction and loss (most importantly, human loss). Meanwhile, “checkbookers” effectively continue to “win” by influencing the world through its existing mechanisms: from investments to settling the debts of other countries. These strategies can bring about long-term, smart geopolitical victories without significant damage. So, when Gulf money talks, it talks effectively with mid- and long-term thinking in mind and, in the Syrian case, will also be demonstrable in the near future.

• Dr. Diana Galeeva is an academic visitor to Oxford University.