The year 2025 marks a definitive turning point in the Middle East. The region, traditionally defined by its energy reserves, is decisively shifting its national calculus from hydrocarbons to computational power and data. This transition is not merely economic; it is an existential strategic pivot aimed at achieving Digital Sovereignty.

By Darine Saleh
The evidence of this ambition is manifest in the scale of investment: the UAE's Stargate project—a reflection of the region's hyper-scale ambitions—is linked to a $500 billion strategic outlay over four years, with the first AI centre in Abu Dhabi launching at 200 megawatts in 2026. Saudi Arabia's Project Transcendence represents a $100 billion AI program, underpinned by over $40 billion in partnerships with U.S. tech companies.

Even the non-oil-rich economies are mobilising: Egypt announced a new National AI Strategy targeting 7.7% of GDP by 2030. Regionally, agreements like Qatar's deals with OpenAI and PwC (December 2025) and Kuwait's partnership with Microsoft (March 2025) to establish an AI-powered Azure data centre solidify a clear objective: to control technology rather than consume it.

However, this national strength is purchased at a high price, creating a profound contradiction. While these states gain geopolitical leverage on the world stage, their citizens face an erosion of digital freedom. National stability is prioritised over personal privacy, and economic growth is tethered to a critical technological dependency on foreign superpowers.

Data as the New Sovereign Weapon
When leaders proclaim that "data is the new oil," they are asserting that data is the ultimate instrument of state control. This is reflected in two parallel legislative and financial developments: Data Localisation and Financial Sovereignty.

In Saudi Arabia, the establishment of Humain, the sovereign wealth fund’s comprehensive AI ecosystem, centralises control over data centres, cloud services, and foundational AI models. This is legally reinforced by the Personal Data Protection Law (PDPL), which fully came into effect in September 2024.

While ostensibly a move to safeguard privacy, the PDPL's requirement to store all personal data inside Saudi borders is, critically, a mechanism for sovereign data consolidation. It creates a digital fence: foreign governments cannot access the data, but the state holds complete control over all digital information concerning its citizens.

The push for Central Bank Digital Currencies (CBDCs) follows an identical pattern. In November 2025, the UAE completed its first real CBDC transaction using the mBridge platform, with 19 Middle Eastern countries now exploring CBDCs. Concurrently, Dubai has become a global leader in tokenising real-world assets, securing approximately $17 billion in on-chain value by 2025.

The strategic goal is to reduce reliance on the U.S. dollar and Western banking systems to achieve financial independence. However, the design of CBDCs allows governments complete, centralised visibility into every transaction, transforming financial freedom from the West into total financial visibility for the state.

The emergent threat of quantum computing further justifies this centralisation. The consensus warning about "Harvest Now, Decrypt Later" attacks—where data encrypted today is collected and stored for future quantum decryption by adversaries—provides a compelling national security pretext for governments to aggressively collect and archive all forms of digital information now, preparing for a future where absolute digital hiding may be impossible.

The cultural and labour paradox of AI adoption
The region’s AI race includes an earnest effort to build culturally aligned foundational models. The UAE’s Jais AI, which expanded to 70 billion parameters in August 2024, aims to represent Arab culture and context authentically.

Yet, the training data reveals a severe limitation: it relied on 279 billion English words compared to 116 billion Arabic words. This means over 70% of its foundational knowledge came from English content.

The resulting paradox is that the region is developing AI that appears Arab but fundamentally operates like a Western model, thereby preventing true cultural independence. Egypt faces a similar challenge in developing large Arabic language models that require massive amounts of high-quality, clean Arabic data, which remains scarce.

The social cost of this technological acceleration is most visible in the labour market. The rise of cheap, powerful AI agents—like the system introduced by Microsoft and Ghaia.ai for the Kuwait Oil Company, which automates rig scheduling and cuts idle rig time by 50%—threatens to evaporate ordinary jobs.

The prescribed solution for workers is to transition into "coordinators" who manage these digital agents. This creates a severe AI-induced social division: it benefits a small, educated elite who can master complex prompting and oversight, while leaving the majority of regular workers vulnerable to displacement. The state's aggressive push for national AI leadership implicitly prioritises technological supremacy over social stability.

The architecture of digital control
The shift in governance is toward Smart Surveillance and pre-emptive control of public discourse, a key feature of the region’s Developmental Sovereignty model. Governments are moving beyond reactive monitoring to managing social media content before publication using AI to pre-emptively stop the spread of perceived problems.

This control is strategically legitimised by selectively adopting Western policy precedents. Arab states point to actions in democratic nations—such as Australia’s use of geo-blocking to restrict content—and ask, "If they can geo-block content that's 'politically misleading,' why can't we?" This is a strategic mechanism to de-liberalise global tech policy: adopting the tools of control while rejecting the underlying values of individual digital rights.

The most invasive development is the institutionalisation of the Internet of Behaviour (IoB). This technology merges comprehensive biometric data with online behavioural footprints to construct a "complete profile" of every citizen. The goal is to predict real-life actions based on digital conduct, leading to citizens being "sorted and classified" by their digital footprint.

The trade-off is stark: this system enables unparalleled efficiency and service delivery, such as the Egyptian Judiciary's use of Azure AI solutions to accelerate decision-making, and Saudi Arabia's "Factories of the Future" program to upgrade 4,000+ factories into smart, automated facilities.

However, this efficiency comes at the cost of zero adequate privacy, where every online action creates a permanent, state-accessible record.

The geopolitical anchor: strategic dependency
Despite massive investments in autonomy, the region's AI race is fundamentally constrained by persistent dependence on U.S. technology.

The most powerful AI chips—the accelerators built by Nvidia—remain under U.S. export control. The November 19, 2025, AI Memorandum of Understanding between the U.S. and Saudi Arabia, alongside the Crown Prince's announcement of a $50 billion short-term semiconductor purchase, confirms this relationship.

Washington approves chip sales strategically to "anchor" Gulf countries in the American technological orbit. This makes the partnership a form of technological control disguised as collaboration, where growth is conditional on U.S. geopolitical consent.

This dependency is contrasted by China's alternative: the Digital Silk Road (DSR), which offers infrastructure and governance without the political demands of the West. The Arab world is thus navigating a unique path, creating a hybrid model that adopts the speed and power of American hardware while embracing Chinese-style state-centric control systems.

The net effect of these competing forces is the "Splinternet"—a fragmented digital world. The Middle East is not merely a participant in global technology; its unique, state-led model is actively contributing to the breakup of the unified internet, dividing the digital world along ideological lines over freedom, privacy, and state power.

The unresolved test of sovereignty
The Arab world's technological push in 2025 demonstrates remarkable state-led planning and the powerful leverage of sovereign capital. The region has rapidly transformed into a significant force in global AI and data.

However, the actual test of this Developmental Sovereignty model lies in its ability to reconcile its internal contradictions. The current calculus results in national power derived from citizen surveillance, economic growth dependent on foreign chips, and state efficiency achieved by ceding personal privacy.

As 2025 closes, the most critical question remains unresolved: Can these nations successfully manage the widening gap between their world-class digital infrastructure and their increasingly tightly-controlled citizenry, while simultaneously mitigating the powerful gravitational pull of the U.S. and Chinese technological spheres?

The future belongs to the technologically adept, but in this new digital era, the question of who truly controls that future is the ultimate measure of sovereignty.