German Chancellor Angela Merkel on Monday began a four-day tour of the Gulf region to promote the Middle East peace process. Political talks in the United Arab Emirates (UAE), Bahrain, Qatar and Saudi Arabia will also be dominated by regional security issues and the nuclear standoff with Iran.

The ongoing financial crisis, the weakness of the euro and ensuring the security of Europe's oil supply will also be high on the agenda. However, critics have been wondering why the German chancellor should embark on tour of Gulf states while the euro is in the middle of its worst crisis ever.

"Because they also have an interest in a strong Europe, the Gulf states have proved very helpful in the economic crisis with investments. One example is Qatar's cooperation with VW and Porsche," Merkel's foreign policy advisor Christoph Heusgen explained.

German business elite

Accompanied by a delegation of German business leaders, Merkel sealed contracts for plastic production and a natural gas service during her first stopover in Abu Dhabi in the United Arab Emirates. The UAE is one of the most important economic partners for Germany in the Middle East.

The list of top managers on the trip reads like a Who's Who of Germany industry: Siemens chief Peter Loescher, Deutsche Bahn CEO Ruediger Grube, Linde CEO Wolfgang Reitzle and Eon-Ruhrgas Manager Bernhard Reutersberg.

The German Chamber of Industry and Commerce estimates that current projects in the Gulf are worth around 2.8 billion euros ($3.5 billion). According to Middle East expert Felix Neugart, trade is no longer restricted to traditional infrastructure projects like housing construction, power and water supply.

"Increasingly, qualitative aspects are gaining more and more importance, ranging from traffic planning, waster disposal, recycling and water treatment projects," said Neugart. "German companies are well positioned in these market areas."

Despite the economic downturn, the Gulf region still enjoys a strong economic growth rate that hardly ever dips below the 5 percent mark, thanks to its vast oil and gas resources. Between 2000 and 2008, German exports tripled in the Gulf region. Then the global financial crisis hit and exports plunged.

"I believe that the trip sends an important signal at the right time, as these states gain more and more importance for us", said Neugart.

CO2-free city

On Tuesday, Merkel is scheduled to visit the city of Masdar in the United Arab Emirates, a prestige project aiming to be the world's first CO2-free city. It is also home to the international renewable energy association IRENA.

Merkel's next stop is Saudi Arabia where she intends to thank Riyadh for its support in securing the release of two German hostages held by militants in Yemen. She will also hold talks with Saudi businesswomen and give a speech at the King Abdullah University for Science and Technology, the first academic institution where men and women study on a equal footing.

Mideast peace efforts

Talks in Saudi Arabia, which is a G-20 member, will concentrate on the planned reform of the financial markets, the upcoming G20 summit in Canada, the deadlocked Middle East peace process and the nuclear standoff with Iran. Merkel's foreign policy advisor Christoph Heusgen said the countries in the Gulf Cooperation Council have a central role to play in resolving the standoff with Iran.

"States in this region view Iran's nuclear programme as a threat to their security. As direct neighbors they would automatically be affected and also are the first victims in any escalation," he said. "That's why we want to win their cooperation. On the one hand in negotiations, and if these negotiations fail - sanctions. And as neighbors they will be called upon to ensure, first and foremost, that these sanctions are imposed and monitored.“

On the final leg of her Gulf tour, Merkel will hold political talks with Bahrain before returning to Berlin. The trip is not without its stumbling blocks, however. For years negotiations on a free trade zone with the Gulf Cooperation Council have been at a standstill.

Because of the weak euro, the German leader will not have the same political clout she's been used to in the past. That means she may have to wait before winning greater access to the lucrative Gulf markets.

Author: Richard Fuchs (nrt)

Editor: Rob Turner