Role of Geopolitics in Import Shares of Leading Trade Partners in GCC Import Markets

This study focuses on how the market shares of leading exporters in the GCC (Gulf Cooperation Council) countries have been impacted by major geopolitical events. The SUR regression model is used to investigate the impact of important events on relative markets. The main hypothesis is that GCC imports from the US are sensitive to the US involvement in the Arab-Israeli conflict and US military interventions in the Middle East. To investigate this theory, four important geopolitical events are considered: Gulf War I (1991), Second Palestinian Intifada (2000-2001), The September 11 terror attacks (2001) and the US invasion of Iraq (2003-2004). The statistical results suggest an association between both, the Gulf War I and the US invasion of Iraq, and changes in US market share in GCC imports. We observe a positive association between Gulf War I and the US market share in the aggregate imports of the GCC countries. On the other hand, the statistical results suggest a negative association between the invasion of Iraq and the US market share in aggregate imports of the GCC occurs. Among GCC countries, this negative association is only significant for the US market share in Saudi Arabia. Finally, the results for the second intifada/September 11th attacks are mixed. [PUBLICATION ABSTRACT]