Energy without borders: Why the Middle East needs an energy Schengen

For more than a century, the Middle East has been one of the world’s most important centres of energy supply. Yet a strategic paradox remains at the heart of its energy architecture: a region that exports oil and gas across the world still lacks a coherent framework for exchanging energy within itself.

Electricity grids, regulations, markets and much of the region’s energy infrastructure continue to be designed and governed primarily within national boundaries. Meanwhile, the nature of the energy challenge is changing. Rising electricity demand, extreme heat, desalination, rapid solar deployment, the digitalisation of economies and the emergence of hydrogen are creating challenges that will become increasingly difficult to manage solely at the national level.

This is where an idea that may initially sound ambitious deserves serious consideration: a Middle East Energy Schengen.

An Energy Schengen — not another union

An Energy Schengen is neither a proposal to replicate the European Union nor an invitation to political integration or the surrender of national sovereignty. “Schengen” should be understood here as a policy metaphor, not an institutional blueprint.

What the Middle East needs is a regional framework for energy interoperability: one that reduces barriers to the movement of electricity, gas, hydrogen, capital and energy technologies while gradually making participating countries’ grids, regulations, tariffs, standards and market mechanisms more compatible.

Put simply, the objective is not merely to connect cables and pipelines. It is to ensure that connected energy systems can actually work together.

According to the International Energy Agency, solar photovoltaic capacity across the Middle East and North Africa could increase roughly tenfold by 2035, with around 200 GW of new capacity added. At the same time, investment in electricity grids is expected to account for nearly 40 per cent of total power-sector investment in the region over the coming decade.

The strategic meaning of these figures matters more than the numbers themselves. As variable renewable generation expands and electricity demand from cooling and desalination rises, larger and more flexible cross-border grids become increasingly valuable. One country may have surplus generation at a particular hour while its neighbour is experiencing peak demand. Regional interconnection can turn part of this imbalance from a national problem into a regional opportunity.

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The building blocks already exist

The Middle East does not have to build an Energy Schengen from scratch. Some of its foundations are already taking shape.

One important milestone came in Cairo on 2^nd December 2024, when Arab states signed two agreements laying the institutional foundations for the Arab Common Electricity Market. The initiative is intended to expand cross-border electricity trade while developing the technical, regulatory and market frameworks required for a more integrated regional power system.

The Gulf provides another example. The GCC Interconnection Authority has connected the electricity systems of Gulf Cooperation Council states for years, while the extension of this architecture towards Iraq represents another step beyond the original Gulf network.

The GCC-Iraq interconnection project is designed to supply around 500 MW of electricity to southern Iraq while creating infrastructure that could support wider electricity trade between Iraq and the Gulf.

These initiatives are not yet an Energy Schengen. But they demonstrate something important: the physical foundations of regional energy cooperation are no longer merely theoretical.The next challenge is to transform separate interconnections into a more coherent regional architecture.

Four pillars of an Energy Schengen

Such an architecture could rest on four pillars.

First, physical interconnection. Electricity grids should be the starting point because cross-border power trade can produce relatively immediate and measurable benefits. Over time, gas infrastructure, energy storage, hydrogen and low-carbon fuels could also become part of this framework.

Second, regulatory compatibility. A cable without compatible rules creates only a limited market. Transmission tariffs, technical standards, grid access, clean-energy certification and dispute-resolution mechanisms will need to become progressively more aligned.

Recent EU-GCC energy dialogues and green-transition initiatives have increasingly focused on issues such as hydrogen standards, certification, port infrastructure, clean-energy corridors and future market access. These discussions do not yet constitute an institutionalised common regime, but they illustrate a wider reality: future energy trade will depend not only on resources, but also on compatible standards and rules.

Third, cross-border finance. Regional infrastructure requires regional capital. Sovereign wealth funds, development banks, private investors and international financial institutions could develop financing instruments for projects whose benefits extend beyond any single country.

Fourth, strategic safeguards. Greater connectivity must be accompanied by rules capable of protecting participating states when political relations deteriorate.

When connectivity becomes leverage

Energy interdependence does not automatically produce peace. The same network that facilitates cooperation under normal conditions can become an instrument of pressure during a crisis.An Energy Schengen without credible governance could therefore create new vulnerabilities rather than reduce existing ones.

The principle should be clear: interdependence without rules creates vulnerability; interdependence governed by rules can create resilience. Any regional framework should therefore include safeguards against arbitrary supply interruptions, emergency protocols, dispute-resolution mechanisms, strategic reserves and diversified supply routes.

The objective should not be dependency for its own sake, but managed interdependence.

This distinction is particularly important in the Middle East, where energy infrastructure has long been intertwined with national security and geopolitical rivalry. Governments will not — and should not — place their energy security in the hands of neighbouring states without credible mechanisms for managing political risk.

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Integration should not wait for political reconciliation

One of the enduring problems of regional cooperation in the Middle East has been the assumption that political disputes must first be resolved before meaningful economic cooperation can begin.

Perhaps that sequence should be reversed.Countries do not need to agree on every geopolitical issue before they can trade electricity, establish common technical standards or jointly finance energy infrastructure. Technical cooperation can begin in areas where benefits are measurable and trust can be accumulated project by project.In this sense, an Energy Schengen is not a project for a “grand reconciliation”. It is an architecture of limited but cumulative cooperation.

Where should it begin?

Implementation should be gradual.The first phase should focus on electricity: expanding existing interconnections, harmonising technical standards and facilitating transparent cross-border power trade through existing and emerging regional frameworks, including the Arab Common Electricity Market and the GCC interconnection system.

The second phase should deepen regulatory and financial coordination by developing clearer market rules, common investment frameworks, financing mechanisms for cross-border infrastructure and joint renewable-energy projects.

The third phase could bring gas, storage, hydrogen and low-carbon energy corridors into a broader regional architecture.

Nor does every Middle Eastern country need to join simultaneously. A coalition of willing states could begin the process while keeping participation open to others. Successful projects are likely to persuade potential participants more effectively than political declarations.

From a geography of conflict to a geography of connectivity

For decades, the Middle East’s energy map has been read through oilfields, pipelines, chokepoints, sanctions and export routes. The map of the future could introduce a different vocabulary: interconnected grids, regional markets, energy storage, compatible standards and cross-border electricity trade.

An Energy Schengen would not erase the political borders of the Middle East. Its objective is more limited — and perhaps more achievable: reducing the friction that energy encounters when crossing those borders.

The Middle East does not need to wait for a grand political settlement before beginning regional integration.

It can start where shared interests are immediate, measurable and essential to everyday life: energy.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.