The UAE and Saudi Arabia: From allies to competitors in economic and regional ambitions

Ever since the announcement of the signing of the memorandum of understanding during the recent G20 summit in New Delhi, India, there has been a significant amount of discussion surrounding the economic corridor project that links India and Europe through various regional countries, including those in the Gulf.

The website "Asbab" delves into Saudi Crown Prince Mohammed bin Salman's resolute efforts to secure regional dominance. This is exemplified by his role in unveiling the memorandum of understanding as a representative of the Middle East, underlining Saudi Arabia's pivotal role in the project. It's worth noting that the concept behind this initiative originated from Abu Dhabi rather than Riyadh. From the UAE's perspective, this potential corridor serves as a crucial maritime hub within the project. It allows the UAE to integrate its economic and trade interests with numerous regional and international powers while enhancing the country's security against external threats.

President Joe Biden acknowledged the Emirati role when addressing President of the United Arab Emirates, Mohammed bin Zayed Al Nahyan, saying, "I don't think we would be here without you."

Recent reports from The Wall Street Journal have shed light on escalating disputes between the UAE and Saudi Arabia concerning various matters, including Yemen and oil-related issues. Notably, senior leaders from both nations have intentionally refrained from participating in recent events together. Despite their official alliance, they have diverged on multiple fronts and engaged in competition for foreign investments and influence in the global oil markets. This competition has even extended to clashes over the direction of the Yemeni conflict.

A key source of contention lies in the UAE's perception of itself as a "competitor to Saudi Arabia rather than a junior partner"

According to Eman Al-Hussein, an expert at the Arab Gulf States Institute in Washington, she stated to the newspaper, "Regional competition among Gulf countries has evolved in recent times as Saudi Arabia and the United Arab Emirates seek to attract foreign investors and talents. Nevertheless, the Kingdom of Saudi Arabia and the United Arab Emirates still maintain cooperation in various areas. Gulf states are learning how to coexist despite their differences."

Both Gulf nations are in the process of "reassessing the power dynamics within their bilateral relationship, particularly within the regional and international context". According to observers of Gulf affairs, one of the primary drivers of these conflicts is the UAE's self-image as "competitor to Saudi Arabia rather than a junior partner". This perspective is articulated by Cinzia Bianco, a researcher at the European Council on Foreign Relations.

Dina Esfandiary, Senior Advisor for the Middle East and North Africa Program at the International Crisis Group, observes that üntil a few years ago, there was little talk of such divisions among Gulf nations and overt efforts to pursue goals that clashed with one another". However, this has now become "increasingly commonplace". The Emiratis are concerned that Saudi Arabia is acting against their interests, while the Saudis worry that the UAE poses a threat to Riyadh's dominance in the Gulf.

The issue of the relationship between the "two roads"

Saudi Arabia and the UAE rank first and third in terms of the highest volume of construction for the Belt and Road Initiative in the first half of 2023, achieving $3.8 billion and $1.2 billion respectively. Simultaneously, both countries are fostering ties with India, a major competitor of China in Asia and the second-largest buyer of their oil. The inclusion of India in the recent economic corridor was an Emirati proposal. This move facilitates new avenues for trade and investment in regions where Indian commercial interests are growing, including Saudi Arabia and the UAE, as pointed out by Sachin Chaturvedi, Director General of the Research and Information System for Developing Countries.

Trade between the UAE and India amounts to $84 billion, with $15 billion invested. India imports $42 billion worth of goods from Saudi Arabia, with exports amounting to $11 billion. Abu Dhabi's Investment Council, with a budget of $850 billion, has chosen the state of Gujarat, India, as the location for its second overseas office. Furthermore, the Saudi Ministry of Investment is expressing its desire to establish an office in India as well.

Dr. Ahmed Al-Shahri, an international relations researcher and head of the Saudi Experience Forum, clarifies that "the India-Europe corridor is an economic trade route devoid of political biases, not aimed at any particular entity, free from competition with other routes, and devoid of opposition to existing corridors. Instead, it seeks integration with current routes and aims to support them. This is especially important in light of the world's increasing need for such corridors and economic pathways to ensure the preservation of supply chains and energy resources."

"Being present in the middle of the railway line to India and Europe kills many birds with one stone for Mohammed bin Salman and Mohammed bin Zayed," Will the competition between them remain within its natural boundaries?

Speaking with Raseef22, Dr. Al-Shahri concludes that "Saudi Arabia and the UAE, both economically influential nations with global reach, are intent on safeguarding energy security, supply chains, and their positions within OPEC and OPEC Plus. Their policies, marked by balance, have proven successful on both regional and international fronts. This was evident during the COVID-19 crisis and has been reaffirmed amid the Russian-Ukrainian conflict and its repercussions on energy and food supply corridors. This necessitates forward-thinking approaches and foresight for the future, following a methodology to serve the world, particularly the most economically disadvantaged nations."

The Indian corridor.. Escalating competition?

"Being present in the middle of the railway line to India and Europe kills many birds with one stone for Mohammed bin Salman and Mohammed bin Zayed," according to Robert Mogilnicki, a resident researcher at the Arab Gulf States Institute, as many components of the project are already in place. The UAE's Jebel Ali Port has functioned as a distribution center for decades and is connected to Saudi Arabia through some existing railway lines. On the Saudi side, the North-South Railway stretches to the Jordanian border. Hence, "starting the railway network from scratch seems unnecessary", as Prem Kumar, former advisor to President Barack Obama, points out. Nonetheless, expanding the Saudi rail network could pose challenges due to the need to traverse desert terrain vulnerable to sandstorms and scorching heat.

The one who invests more in the India-Europe corridor is likely to secure the lion's share of geopolitical influence. Political analyst and Gulf affairs expert Darwish Khalifa suggests that President Biden's handshake with Sheikh Mohammed bin Zayed and Saudi Crown Prince Mohammed bin Salman at the project's announcement implies that the responsibility for financing the project will fall on them.

Washington has begun to seriously think about rearranging its cards and position in the Middle East, where it may lose some of its influence.

In his remarks to Raseef22, Khalifa adds, "Regarding the Indian Corridor project and its impact on the competition between Riyadh and Abu Dhabi, predicting and assessing this competition, especially in such a massive project, demands caution before implementation." He speculates that Saudi Arabia will start pumping $20 billion immediately upon the project's launch. In his view, "Washington has begun to seriously think about rearranging its cards and position in the Middle East, where it may lose some of its influence following China's entry through the narrow corridor. This has disrupted the regional balance, as it secured billion-dollar deals with Arab Gulf states, particularly Saudi Arabia. Not to mention the security aspect, with the agreement brokered between regional rivals Saudi Arabia and Iran."

Healthy rivalry

Both nations have maintained exceedingly close diplomatic relations for decades. However, they are competing to attract investors and businesses. Lately, their relationship has witnessed intensified competition with Crown Prince Mohammed bin Salman's policies of openness and efforts to establish a competitive tourism economy, including the city of "NEOM," designed to rival Dubai in many aspects. Riyadh has also passed a resolution stipulating that it will not contract any foreign companies unless they relocate their regional headquarters to the Kingdom by 2024. Additionally, Abu Dhabi has expressed dissatisfaction with the terms of reconciliation reached at the Al-Ula Summit between Riyadh and Doha, as well as the absence of prior consultation or coordination with Saudi Arabia regarding the UAE's withdrawal from the military alliance led by Riyadh in Yemen in 2019.

The recent amendments to Saudi Arabia's import regulations, particularly those involving Gulf Cooperation Council (GCC) nations, have intensified economic competition between the kingdom and the United Arab Emirates. These changes exclude goods produced in free zones or those with Israeli components from enjoying preferential customs privileges. Consequently, this shift is impacting the UAE's prominent regional position in trade and business, particularly due to its established and normalized relations with Israel.

As Khalifa points out, the economic rivalry between Saudi Arabia and the UAE started becoming conspicuous around two years ago. This became evident when the Kingdom called upon regional and global companies operating within its borders to establish regional headquarters in Riyadh, mirroring their operations in Dubai. While Saudi Arabia boasts the largest economy in the region, its share of regional headquarters doesn't align with its ambitions in terms of investments and international trade. Simultaneously, there has been a gradual relocation of Arabic and Al Hadath television channels, along with the MBC Group, from Dubai's Media City to Riyadh. However, the partnership between these two Gulf nations in the corridor is an attempt to mitigate potential financial losses in the event of a Chinese economic slowdown or an escalation of conflicts in the Indian and Pacific Ocean regions. This is despite their strong ongoing partnerships with Beijing.

Saudi Arabia's growth prospects, driven by its population, geographical location, and abundant resources, surpass those of the UAE. This is something the UAE is aware of. Therefore, it isn't competing with Saudi Arabia in terms of the size of the economy but is steadfast in refusing to yield its status as a regional business hub to Riyadh. While Saudi Arabia may have improved its global ranking in ease of doing business from 92nd to 62nd place last year, it still lags far behind the UAE, which holds the 16th spot globally.

The UAE is actively seeking to disrupt the Saudi-Omani dynamics that have heightened the stakes in trade competition. Recent revelations indicate that the Asyad navigation company, owned by the Oman Investment Authority (OSC), is contemplating the purchase of ports and facilities abroad, potentially positioning it as a competitor to the UAE's global ports. Additionally, both Saudi Arabia and Oman have announced an agreement to expedite the completion of the land linkage between them, accompanied by security discussions regarding the development of their border crossing. This will facilitate direct traffic between the two nations and provide Saudi Arabia with direct access to the Indian Ocean through Oman's rapidly evolving port network. Recently, a crude oil export pipeline was announced to transport Saudi crude oil through Oman, bypassing the strategic Strait of Hormuz. This pipeline will use the new Duqm Port and its massive oil storage facilities near the Omani region of Ras Markaz. This development undermines the UAE's transport network, as highlighted by David Hearst in the Middle East Eye.

Saudi Arabia's growth prospects, driven by its population, geographical location and abundant resources, surpass those of the UAE—something the UAE is acutely aware of. So it's not going to compete with KSA, but it isn't going to surrender. What will it do?

He adds, "In Yemen, the UAE is actively pursuing control over the strategically vital port of Aden and the island of Socotra. Extensive Emirati support has enabled the Southern Transitional Council to assume authority over numerous Yemeni ports and islands, providing them with access to the strategically strategic Bab al-Mandeb Strait and the Horn of Africa. This strategic maneuver directly clashes with the interests of Saudi Arabia and Oman."

In Khalifa's perspective, Riyadh and Abu Dhabi have emerged as pivotal figures in delineating the boundaries of international economic competition. This is evidenced by their essential roles within the Indo-European economic corridor. Furthermore, their recent invitation to join the BRICS group underscores their significance in shaping international decisions.

The schism between Saudi Arabia and the UAE reflects their broader competition for geopolitical and economic influence in the Middle East and global oil markets, particularly in light of the United States' reduced engagement in the region. Earlier, Saudi efforts to elevate global oil prices sparked tension with the UAE. The latter accused Saudi Arabia of coercing it into agreeing to oil production cuts, even suggesting the possibility of withdrawing from OPEC due to its frustration with Saudi dominance within the organization.

In conclusion, it is worth noting the extensive coverage by the BBC and The Wall Street Journal on this matter, emphasizing the significance of these critical disputes. This remains the case even when the reality often falls short of the narrative presented, both in terms of form and content. Nonetheless, what our nations truly need is constructive competition between their leaders in investment, development, economic leadership, and politics, within the bounds of constructive competition. Otherwise, our countries will remain at the bottom of international development lists while topping the charts in poverty and aid reception.