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This is an audio transcript of the FT News Briefing podcast episode: Gulf states caught between US and China

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, September 22nd, and this is your FT News Briefing.

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Uber delighted investors with a forecast that it will actually, for the first time ever, be profitable. And the European Commission may withhold critical funds from Poland and Hungary amid its dispute over human rights issues. Plus, we’ll talk to our Middle East editor, Andrew England, about how Gulf states are navigating relations with two superpowers.

Andrew England
Some years ago, both the UAE and Saudi Arabia wanted to buy armed drones from the US. They couldn’t do that. So where did they go? They turned to China.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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The European Union is considering withholding funds from Poland and Hungary amid a dispute over human rights issues in those two member states. These funds are aimed at evening out economic disparities across the EU. The Warsaw and Budapest are currently at odds with Brussels over rule of law issues, including allegations of discrimination. The European Commission recently wrote to several regional authorities in Poland. It said it was suspending certain funds after their decision to create areas that ban LGBTQ people. The EU’s Charter of Fundamental Rights is now part of budget legislation, and officials have to check for compliance before releasing funds. One EU diplomat said if Brussels were to withhold regional aid, it would be crossing a Rubicon.

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It took more than a decade and billions of dollars that Uber could post its first profitable quarter. The ride-hailing group on Tuesday projected that adjusted gross bookings in the current quarter would come in at around $23bn. Investors were thrilled. Uber stock price shot up 11 and a half per cent yesterday. The FT’s Dave Lee says many people doubted Uber would ever turn a profit.

Dave Lee
I mean, it was, you know, a company that was in its early stages heavily subsidising rides in order to get people in the cars. And indeed, you know, since its founding in 2009, this is a company that spent $22.1bn and just, you know, ploughed that cash into into getting getting to where it is today. And many people thought that the sums would never add up. You know, you’d never be able to do rides at a price that consumers wanted and also, you know, pay drivers enough and turn a profit. And that’s something they’d promised investors would happen. They said it was going to happen by the end of this year. And so they’ve come in one quarter early, it seems.

Marc Filippino
So this sounds great, Dave, but does this profitability look sustainable?

Dave Lee
Well, the first thing, first and foremost is to keep doing this. I mean, they said to expect the same in Q4. The question is, next year, you know, to what degree their food business continues to be elevated as it is right now, and also to what extent they have to pay for other things like making sure they don’t have driver shortages, which is another problem they’ve got right now. So there are a few kind of question marks over parts of their business that could see that sort of profitability fluctuate.

Marc Filippino
Now, where where do you see the growth coming from, Dave?

Dave Lee
Well, I think the food delivery business and I guess the wider delivery business, that’s where a lot of growth is going to be seen for Uber. So it’s going to be grocery delivery. It’s going to be alcohol delivery is another big area. So I think, you know, Uber has to diversify its business, but in a way that keeps that profitability. And that’s something they haven’t had to do so much in the past. I mean, you remember, Marc, you know, they’ve had flying cars, they’ve had self-driving cars. You know, there are all these projects that many of them were a kind of hangover from the Travis Kalanick days. But now any future growth has to be quite sensible growth. And that, to be fair, is what Dara Khosrowshahi, the CEO, is is known for. And I think, you know, between him reaching this milestone, having trimmed Uber’s business down, as well as cleaning up the general mess that Travis Kalanick left of Uber, that’s that’s going to be seen as a considerable achievement for Khosrowshahi. The question now is whether he has the ideas to to grow Uber further in 2022 and beyond.

Marc Filippino
Dave Lee covers Uber for the Financial Times.

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Gulf Arab states have been close partners with the US for years. They’ve invested in American assets and weaponry and taken part in US-led military operations around the world. But when Gulf states can’t get what they need from the US, they have another partner to turn to.

Andrew England
You know, go back some years ago. Both the UAE and Saudi Arabia wanted to buy armed drones from the US, and they couldn’t do that. So where did they go? They turned to China.

Marc Filippino
Andrew England is the FT’s Middle East editor, and he says over the years, the Gulf’s Arab states have shifted towards China.

Andrew England
It was always sort of this compact were the Gulf countries supply oil, helps sustain global energy stability. And the US would be the kind of the security guarantor for these relatively young states. There’s a sense now that that compact is being weakened. The US is looking to withdraw from the region, pull down its military assets from the region and get out of, you know, forever conflicts, and that kind of shape the thinking of Gulf states. Is the US the reliable partner? I mean, this has been happening at the same time as economic relations with Asian powers, particularly China, India, have been growing.

Marc Filippino
So when it comes to the US role in the Middle East, Andrew, how big of a shift are we talking about here?

Andrew England
At the moment China is not going to replace, it isn’t replacing the US as a security power in the region. It’s more about the Gulf states looking to balance their relationships, to manage their regional and international relations. And if they think they can rely less on the US and China is becoming this growing economic power, the biggest buyer of Gulf oil and a source of the technologies, the artificial intelligence that the Gulf states want, then they’re going to strengthen their relationships with China. It’s kind of a natural progression in a way. And a lot of it’s pragmatic. It’s driven by economics. It’s driven by what China can produce. And I’m there again, I’m talking about technology. I’m talking about renewable energy. I’m talking about artificial intelligence, these kind of things. So on the one hand, they’re now the biggest buyer of Gulf oil. On the other hand, they’re producing things the Gulf States wants, and they’re providing them without conditionalities, without questions.

Marc Filippino
So how worried is the US or, you know, what does the US worry about as Gulf states, including Saudi Arabia, continue to build their ties with China?

Andrew England
Well, what it is, is the US is worried about its partners in the region and elsewhere, whether it’s the UK, whether it’s Israel, whether it’s the UAE using Chinese technology, which they (inaudible) fear could be used in a negative way against the US, whether, I don’t know, it’s getting hold of information about sensitive US technology or security or military military technology, those kind of things. They’re kind of worried that if this relationship deepens, then countries that they’ve partnered with, countries where they have bases, countries where they sell the military equipment, that suddenly becomes vulnerable to the Chinese being able to tap into it and get hold of or infiltrate US technology deployed in the Gulf states.

Marc Filippino
Now, the Gulf countries ever feel like they’re in an awkward position, like they have to choose between the US and China, or do they, you know, see themselves as being able to work with both superpower superpowers?

Andrew England
I think, ultimately that’s what they want to do. They want to straddle that line. They want to work with both. They don’t want to have to make a choice between one or the other. The UAE is now going to be taking up a seat on the UN security Council in January for a five-year period. Emirati officials are aware that they’re going to be caught between two of the big permanent members, the US and the China on that Security Council, whether it’s over human rights issues or other things. So, yeah, it’s added in a kind of a layer of strain to the relationship with Washington, while at the same time the UAE, Saudi Arabia, particularly, there’s no way they can’t do business with China. China is such an important buyer of that oil. It’s become the key trading partner for the countries and not just on oil, but in terms of the imports that are going into Saudi Arabia or the UAE. So they’re trying to navigate their way through this, you know, hostility between China and the US and maintain relations with both, and it’s a, it’s a tricky route to navigate.

Marc Filippino
Andrew England is the FT’s Middle East editor.

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Before we go, I want to give you a heads-up that the award-winning Behind the Money podcast is launching a new series starting today.

Behind the Money podcast
Can you make money and leave the world a better place? Businesses are increasingly being asked to be seen to be doing something to try and address bigger social challenges (podcast fades out).

Marc Filippino
This special five part series will explore the world of ESG or environmental, social and governance investing. Trillions of dollars have poured into companies and assets that embrace ESG causes like climate change. The Behind the Money team will explore how much impact ESG is really having. We’ll link to the first episode in our show notes.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.

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