The alliance between Saudi Arabia and the United Arab Emirates appears to be getting closer and closer, symbolized by the apparent friendship between their de facto leaders, Mohammed bin Salman and Mohammed bin Zayed. The two countries have joined forces to counter Qatar's expanding soft power in the Arab world, as exemplified by the failure of the blockade imposed on Qatar in 2017. They have been on the same side in Yemen's military campaign against the Iranian-backed Houthis since 2014. They have engaged with China and Russia and have adopted a more independent policy, unlike their traditional alliance with the United States.
But under the surface of this apparently fraternal alliance lies a calm struggle, as both countries compete for leadership in the Arab world. Behind the scenes, Saudi Arabia and the UAE are engaged in active geo-economic competition on multiple dimensions.
First, competition for foreign investment is fierce. This rivalry dates back to 2009, when Abu Dhabi opposed a proposal to head the Gulf Cooperation Council (GCC)** bank in Riyadh, which ultimately hindered the bank's establishment. Between 2012 and 2022, the UAE saw investment inflows into GDP as nearly 3 percent of Saudi Arabia's5 times, Dubai has become the preferred location for the Middle East headquarters of about 70% of large multinational companies. Meanwhile, oil prices surged in 2022 due to Russia's invasion of Ukraine, driving Saudi Arabia's economic growth by 87%, the highest among the G20 countries, which also generated significant capital inflows. Saudi Arabia has actively encouraged foreign companies operating in the Persian Gulf region to move their headquarters to its territory, warning that companies that do not move their headquarters could break off business relations with Riyadh.
This rivalry is further exacerbated by energy politics between Saudi Arabia (the world's largest oil exporter) and the United Arab Emirates (the fifth). In the summer of 2021, there was a glaring controversy between Riyadh and Abu Dhabi over the Saudi-led OPEC+ to extend the production cuts, and the UAE rejected the proposal. While this tension was quickly and visibly resolved, rumours then emerged that Abu Dhabi opposed Riyadh's dominance within OPEC+ and could consider withdrawing from OPEC.
The race for global prestige has also created a divide between Saudi Arabia and the United Arab Emirates. Both countries are investing strategically to strengthen their soft power by hosting prestigious international conferences. Saudi Arabia has established the Future Investment Initiative Conference, and Abu Dhabi hosts the World Investment Forum, an annual event organized by the United Nations. Both events serve as platforms to convene global leaders and investors to facilitate the coming up of innovative solutions to global challenges. The UAE hosted Expo 2020 in Dubai, the first of its kind in the Middle East. After that, Saudi Arabia made history by winning the right to host Expo 2030. In addition, Dubai was chosen last year as the venue for the key annual United Nations climate change conference. The pledge to host the summit continues, with Abu Dhabi set to host the World Organization Ministerial Conference in February. Following the success of Qatar in hosting the 2022 FIFA World Cup, Riyadh has taken steps to raise the profile of its national football league by attracting elite players. Since the beginning of 2021, Saudi Arabia has committed at least $6.3 billion in sports deals, more than quadrupling from the previous six years' total spending. This may be the first manifestation of the geopolitics of football in the new era. Dubai is known for its relatively open, cosmopolitan society, which attracts celebrities for events and performances. However, this privilege is no longer exclusive to the UAE. In December 2023, Riyadh successfully hosted MDLBEAST Soundstorm, the largest ** festival in the Middle East. Taken together, these efforts reflect the deliberate efforts of the two countries to reshape their international image and promote a positive perception of themselves on the global stage.
The final and most critical rivalry has to do with the "vision" strategy pursued by both countries. The UAE began its diversification journey a few years ago, and through strategic initiatives related to the ports of Khalifa and Jebel Ali, as well as the success of its airline, Emirates, the UAE has become a global hub for transportation and commerce. Despite this, Saudi Crown Prince Mohammed bin Salman launched Vision 2030 in 2016, an ambitious roadmap for the diversification of the Saudi economy. The flagship project in this vision is the NEOM initiative, a multi-billion dollar effort to position Saudi Arabia as the region's preeminent infrastructure, transportation, technology, business and financial hub. Riyadh also pledged to invest more than $100 billion to transform it into a sea and air logistics hub, marking the founding of Riyadh Airlines. This includes challenging the UAE's port dominance with a significant investment in the Jeddah Islamic Seaport, which will be the largest and busiest port in the MENA region. In other words, the "vision" competition has pushed Riyadh and Abu Dhabi into a race for modernity and diversity, often at the expense of each other.
Interestingly, rapprochement with Iran could exacerbate this rivalry. The Beijing-led détente between Tehran and Riyadh has effectively eliminated the main common threat of Saudi Arabia and the UAE in the region, thereby reducing the long-standing geopolitical conflict between the north and south of the Persian Gulf. Looking ahead, the region is likely to enter a new era, with the focus shifting from the geopolitical rivalry between Iran and the GCC to the geoeconomic rivalry between Saudi Arabia and the UAE.
Both countries are also adopting ** policies, which amounts to a direct challenge to each other. In July 2021, Saudi Arabia implemented protectionist policies to boost local industrial production. These regulations exclude the manufacture or use of goods from Israeli inputs in the free zone from preferential tariff concessions. This stance directly challenges the economic free zones that are the cornerstone of the UAE's economy. These regulations, which are aimed at attracting foreign investors to start businesses within the country's borders, are a clear rebuttal to the growing ** relationship between the UAE and Israel.
Policy toward Israel is another potential area of disagreement. While the UAE officially recognized Israel in 2020, Saudi Arabia has not joined the Abraham Accords to date. Israel and the UAE have strengthened their bilateral relations by signing the Comprehensive Economic Partnership Agreement. This economic progress has put Riyadh in a relatively vulnerable position. Israel's war with Hamas has now slowed the process of Saudi normalization with Israel; However, with Riyadh considered the cornerstone of the agreement, the dialogue could be restarted. It would not be surprising if Mohammed bin Salman sought additional concessions, especially on the nuclear program and security guarantees, in order to normalize relations with Israel; Such a move could put pressure on Mohammed bin Zayed's Israeli policy.
As the rift between Saudi Arabia and the UAE widens, their relations with Moscow, Beijing and even Iran could improve at an accelerated pace to counterbalance each other. This, in turn, could weaken the effectiveness of the U.S. strategy in the Middle East and prompt the White House to reassess the importance of the region.