Does economic statecraft achieve foreign policy objectives? The case of stability and soft power in the Middle East.

Wealthy nations regularly deploy economic statecraft-foreign aid and investment-to achieve political objectives, yet its effectiveness remains debated.This study answers whether the Gulf Cooperation Council's (GCC) extensive financial engagement in the Middle East contributes to its dual foreign policy goals of regional stability and soft power.The research employs quantitative panel regressions alongside qualitative case analysis by utilizing unique dataset spanning financial flows from GCC states to ten Middle Eastern countries , sentiment analysis of over 5,000 local newspaper articles, and established stability indices, The results reveal a statistically significant, qualitatively validated, nuanced impact: GCC financial interventions enhance recipient states' security apparatus, thereby improving stability, yet simultaneously reduce domestic state legitimacy.However, no sustained positive effect on soft power is observed, as media-driven perceptions fluctuate dramatically with context and events, ultimately showing transient rather than enduring gains.Through detailed analysis of Egypt, the largest GCC financial recipient, the paper illustrates these dynamics vividly, highlighting conditions under which economic statecraft boosts state security but struggles to generate state legitimacy and lasting soft power.focus of this paper is on both aid and investment under the framework of economic statecraft because states deploy these tools to achieve strategic objectives.The GCC foreign policymakers may not agree on all issues, but two major interests bring them together: stability and soft power.These two are singled out in this research and are referred to as GCC foreign policy objectives.First, as status quo monarchies, all GCC states have an interest in promoting regional stability for both economic and security reasons (Wahba 2017).The region is plagued by destabilizing non-state actors and a long history of coups, and the GCC states' monarchic nature necessitates the maintenance of order.These two features fulfill the conditions of balance-of-power politics (Waltz 1979: 121).It is this desire to "balance" against threats that formed the coalition of GCC states, with a need to maintain stability (Wright 2011, Borck 2021).Haykel (2013) claims that GCC states used their finances to shape their external environment in order to keep the domestic conditions secure.With such established scholarly consensus, this research chose to investigate stability as a political effect.Stability-understood as a condition in international relations where interstate violence is substantially non-existent and the likelihood of sudden disruptive changes is minimal-is an explicit objective of GCC foreign policy.Second, no nation has an interest in losing soft power, especially when this power supports the economic transformations the GCC is undergoing, considering the effect on security, exports, tourism, and logistics, among others.There is no shortage of research on the GCC states' efforts in expanding their soft power; most of this work displays soft power as a desirable outcome for GCC states (see, for example, Brannagan and Giulianotti 2018; Bianco and Sun 2023).Steffen (2017) goes further in claiming that "oil wealth," that is, financial instruments like those within the research focus, has been a main tool of the GCC states in pursuit of international soft power.Soft power, defined as the ability of a country to co-opt rather than coerce, winning hearts through appeal and attraction (Nye 2004), is therefore an implicit foreign policy objective of the GCC. 4Studying the effectiveness, that is the political returns, on finances, is vital for informed perspective and decisions on geopolitics.This study presents a critical answer to the citizens and policymakers of the GCC states.Saudi Arabia's Vision 2030, for instance, states the urgency of resource optimization to secure a sustainable economic future (Vision 2030 2016).Historically, GCC economic statecraft has been pivotal in scenarios ranging from conflict resolution, such as their involvement in the First Gulf War, to economic bailout diplomacy in nations like Egypt and Jordan (Alhasan et al. 2023).No nation has given in aid and investments, relative to their economy, to the Middle East more than those of the GCC (Young 2020).Today, the strategic use of GCC's financial resources remains a key factor in engineering the region, with both international and domestic expectations (see, for example, Hay 2023).In the Gaza war, for instance, major international voices have advocated for reconstruction sponsored by the GCC states.This research not only tracks such contributions but also quantifies the effects of these financial flows on the donor's foreign policy objectives: for the GCC, stability and soft power.This study contributes to the field with four central results.First, it takes a position in, and nuances, an unsettled global debate on the effect of economic statecraft supported by a set of statistically strong correlations and validating causal mechanisms: it finds that economic statecraft correlates with less state legitimacy and more security apparatus in the recipient destination, and no significant movement in soft power.In the literature, a selection of scholars argued that foreign aid improves the donor country's image among the recipient country's public: using public opinion as a measure of soft power (Nye 2011;