POLITICAL QUARTERLY

POLITICAL QUARTERLY

Sovereign Wealth Funds (SWFs) and the Globalization of the Economy in the Arab States of the Persian Gulf Region

Document Type : Research Paper

Authors
Fariborz Arghavani Pirsalami 1
Fatemeh Chegounian 2
1 Associate Professor of International Relations, Department of Political Sciences, Faculty of Law and Political Sciences, Shiraz University, Shiraz, Iran.
2 Ph.D. Student, Political Science, Department of Political Sciences, Faculty of Law and Political Science, Ferdowsi University of Mashhad, Mashhad, Iran.
10.22059/jpq.2026.396190.1008373
Abstract
Extended Abstract
Objective
Sovereign Wealth Funds (SWFs) serve as key financial instruments for managing oil revenues and investing in development projects. Examining the role of SWFs in general, and their performance in the Persian Gulf states in particular, is important for several reasons. First, alongside governments—and at times with organizational autonomy from their parent states—these actors play a stabilizing role in both domestic and global economies. Second, although their operations appear economic on the surface, the rationale for their establishment, their operational processes, and the consequences of their activities all carry deeply political dimensions, making them significant political actors. Hence, the central research problem of this article is to explain the role of SWFs in positioning the GCC countries within the global political economy.

Introduction
To understand the world, economic and political spheres cannot be absolutely separated from one another. With the expansion of globalization, the increasing interconnectedness of economic processes worldwide, and the emergence of new actors on the international stage, the concept of International Political Economy has given way to that of Global Political Economy. This shift has occurred because what is currently unfolding in the world is not confined solely to interactions among states. Today, alongside states, the Global Political Economy hosts numerous actors, many of which operate both independently of states and more effectively than them. Moreover, unlike in the past, contemporary phenomena are no longer merely political or economic in nature and scope; rather, every event and development must be analyzed and assessed across multiple political and economic dimensions, and their respective consequences must be taken into account. The countries of the Gulf Cooperation Council (GCC) region are among those that have thoroughly understood the intertwining of economics and politics on the global stage. Nations such as Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait—due to their economic dependence on oil revenues—have recognized that, in facing economic globalization, they encounter challenges including fluctuations in global oil prices and the need to diversify their economies.

Methodology
Given the considerable similarities between the economic systems of the Persian Gulf states and that of Iran, as well as the prevalence of SWFs in these countries, this article is applied in nature, and the resulting experiences can offer valuable insights for strategic policymaking. The data were collected through library-based research and a meticulous examination of official reports pertaining to these funds, along with statistics from reputable international institutions. The analysis employs a descriptive-analytical approach: first, the growth and expansion trends of these funds in the selected countries are outlined; subsequently, their functions are analyzed within the framework of interdependence theory. Within this theoretical framework, it is demonstrated that these funds, by supplying capital to the global economy, contribute to its stability while, in return, receiving security and taking steps toward diversifying their domestic economies and consolidating internal legitimacy.

Results and Discussion
The Arab states of the Persian Gulf are among the earliest holders of Sovereign Wealth Funds. During periods of rising oil prices and the global financial crisis, they achieved remarkable prosperity. By channeling capital into global financial markets through these funds and engaging in long-term, high-risk investments, these countries have become major actors in the global political economy. The Gulf states have succeeded, through the strategic use of NWFs, in securing important political benefits for their nations—notably the preservation of political stability in the international environment, particularly following the Arab Spring uprisings and the September 11 attacks.
By means of these funds, the GCC countries have not only strengthened their domestic economies and enhanced social welfare but have also broken free from isolation and gained visibility and influence on the global stage. Through the expansion of these funds, the Arab countries have increased the sensitivity and vulnerability of their relationship with the global political economy—extending their reach to Eastern countries and Latin America, as well as to American and European nations—and have made severing this relationship costly for other parties. In effect, through their high-risk investments across various countries, these nations have taken a step toward making their asymmetrical interdependence with the global community more symmetrical.

Conclusion
Sovereign Wealth Funds (SWFs) in the GCC countries face multiple challenges that affect their performance and future prospects. Oil price volatility remains one of the greatest challenges for these countries, as such fluctuations can lead to a decline in foreign exchange earnings and consequently reduce the funds’ available resources. The absence of clear industrial and economic policies regarding the allocation of foreign exchange facility resources leads to resource wastage and diminishes the funds’ effectiveness. This issue is particularly pronounced when there is a need to invest in infrastructure and industrial projects. Managerial challenges, such as the lack of an integrated framework for financing and resource allocation, further reduce the funds’ efficiency. These problems can result in the non-fulfillment of the objectives set for the funds. Furthermore, SWF holders must bear in mind that the foreign exchange facilities offered by these funds, due to their limited advantages compared to other financing methods, may struggle to compete effectively. Finally, many SWFs, especially in oil-producing countries, face challenges in preserving resources for future generations while meeting current needs. This issue requires a balance between current expenditures and savings for the future—a balance that policymakers of these funds must carefully consider. The future of Sovereign Wealth Funds (SWFs)depends on their ability to manage these challenges.
Keywords
Sovereign Wealth Funds
Globalizatio
Interdependence
Persian Gulf
International Political Economy
Subjects
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POLITICAL QUARTERLY
Volume 56, Issue 3
Summer 2026
Pages 671-643

  • Receive Date 08 July 2025
  • Revise Date 10 September 2025
  • Accept Date 17 June 2026