Israel and UAE Struck Historic Free Trade Deal. Here’s Why

Yousrael and the United Arab Emirates deepened ties on Tuesday with a historic free trade agreement—the first of its kind between Israel and an Arab country—at a time of growing criticism of Israel’s treatment of Palestinians. Both Israel, UAE and other countries are claiming the huge economic benefits such an accord could bring. But experts tell TIME that it’s too early to assess the economic impact of the free trade agreement and that the main value of the agreement is political in nature.

Deal, according to the numbers

UAE praises the agreement for lifting tariffs for 96% of goods and for the potential to support budding industries related to environment, energy, digital services, and other areas. According to the Israeli government, the agreement would facilitate trade in products like food and medicine as well as increase competition for government procurement contracts.

Israel and UAE have already predicted that annual bilateral trade would reach $10 billion over five years. That’s more than 10 times what was recorded in 2021. A total of 1,000 Israeli businesses are expected to be opening in Dubai before the year ends.

“They broke a barrier when they decided to sign the agreement,” says Dorian Barack, the co-founder of the UAE-Israel Business Council, a foundation that promotes partnerships between the two countries and Israel and the wider Middle East. “The breaking of that psychological barrier I think has brought a lot of people—who were out of the Israeli market—to consider doing stuff with Israelis.”

But experts remain skeptical about that $10 billion number. According to World Bank data, that amount would make the UAE one of Israel’s largest trading partners. TIME asked a local Gulf expert to not reveal his identity out of concern that his livelihood could be threatened by challenging regional government information. He said that the prediction was wildly optimistic. “Look, if the governments are the source, then they usually exaggerate.”

Political strategies for strengthening Israel’s business relationships

This trade agreement comes just two years after Israel signed the Abraham Accords. These agreements saw Israel normalize ties between the UAE and Bahrain as well as Morocco, Morocco, Sudan, and Morocco. Although the Israeli press championed Tuesday’s agreement, the Emiratis tightly controlled the messaging of the deal by shutting out foreign media from the signing ceremony in Dubai. Many local outlets are controlled or owned by the state.

It’s a reminder that, despite the headline news, the UAE’s budding ties with Israel remain deeply controversial across much of the Arab world—particularly as tensions between Palestinians and Israelis mount. Three days ago, the UAE foreign ministry condemned what it called Israel’s “extremist settlers” for storming Jerusalem’s al-Aqsa mosque, the third holiest site in Islam.

Weeks earlier, Shereen Abu Akleh—the renowned Palestinian-American journalist for Al Jazeera—was shot dead in the Israeli occupied West Bank, most likely by Israeli soldiers, according to a CNN investigation. Israeli police then attacked pallbearers at Akleh’s funeral, sparking international condemnation. These incidents occurred after the arrests of two Palestinians accused of murdering three Israeli civilians using an axe.

Continue reading: The Problems With Israel’s Version of the Killing of Reporter Shireen Abu Akleh

Hasan al-Hasan (a Gulf expert working with IISS), views the trade deal in the context of the wider Emirati strategy of deepening ties to Israel as a way to offset Iran, which is both countries’ strategic enemy.

Abu Dhabi’s top national security advisor, Sheikh Tahnoon al Zayed al Nahyan was sent to Tehran on December 20, 2021. Abu Dhabi now faces a difficult task. The visit aimed to recalibrate diplomatic relations—which soured in 2016 when ally Saudi Arabia executed Shia activists and the Saudi embassy in Tehran was stormed—and also boost cooperation on a number of shared economic files with Iran. But in case diplomacy fails, the UAE can fall back on its relationship with Israel to contain Iran’s regional influence, says al-Hasan.

“By signing this agreement [the Emirates] are saying that despite our differences on the Palestinian issue… we can continue to do business on other unrelated issues,” adds al-Hasan.

Elham Fakhro, a research fellow at the University of Exeter’s Center for Gulf Studies, agrees that the trade agreement is further evidence that the UAE is committed to establishing a warm peace with Israel irrespective of the wider regional reputational damage brought on by the unresolved Palestinian-Israeli conflict.

“It’s been clear that Israel’s relationship with the Palestinians will not affect the trajectory of the relationship between the two sides,” she tells TIME.

What about other Arab nations?

Tel Aviv hopes to attract other Arab countries by highlighting the advantages of bilateral cooperation with Abu Dhabi, despite the current low level in Palestinian-Israeli relations. According to a local Gulf expert, Israel already has trade relations with Western countries. However, Israel’s leaders are keen to tap into the domestic Middle East market to gain regional legitimacy, even though the conflict between Israel and Palestine is still unresolved.

Jordan and Egypt, who have been at peace with Israel ever since 1994 and 1979, respectively, have increased their economic activities with Israel over the past few months.

Cairo, Tel Aviv and a Memorandum of Understanding were signed last November. This agreement aims to improve the Israeli natural-gas exports via its pipelines. Amman signed two months ago a deal to provide Tel Aviv with clean energy in return for desalinated drinking water.

A comprehensive bilateral pact between Egypt and Jordan with Israel, however, is not likely due to the public opinion of both Arab countries.

Contrary the UAE where only 10% of the population is friendly to Israelis, Jordan and Egypt almost exclusively have their own inhabitants. Both Arab governments must approach Israel differently to the UAE, due to popular pressure.

“The UAE does not share a border with Israel and has not directly engaged in warfare and conflict in the way the Egyptians and Jordanians have,” says Bader al-Saif, an expert on the Gulf at Kuwait University. “It is because of that, along with the UAE’s interest in benefiting from Israeli technology and raising its profile, which leads to more collaboration.”

A few Gulf Cooperation Council member countries still trade with Israel through third parties, mostly Turkey or Jordan. These countries are less likely to accept the negative reputational consequences that can come from normalizing their ties with Israel, with indirect trade estimated at $1 billion.

Analysts agree that Tel Aviv will remain unable to access most Arab economies—a longer term goal of Israel—for the foreseeable future.

The local Gulf expert says that while most Arab countries ban Israeli goods, the ban doesn’t hurt Israel’s economy too badly. A report from the Israeli newspaper claims that Israel sells large-ticket products to many Arab countries such as spyware and military equipment. Haaretz.

A total of 37 Israeli spyware Pegasus was discovered in 17 media organisations’ investigations last year. All export licenses to spyware are approved by the Ministry of Defense. It stated that their products would be lawfully used to combat crime and terror.

What makes the UAE a regional exception to Israel

Israel is a priority for the UAE. Al-Saif said that Tuesday’s free trade agreement should be interpreted as part of a larger Emirati effort to diversify its regional collaboration, such as through mending ties with Qatar and deepening investments in Turkey.

The UAE also has a large interest in Israel’s military hardware, as it increasingly prioritizes bolstering its defense capabilities because of what it perceives as U.S. fatigue in the region. However, Al-Saif warned that obstacles will continue to exist for Arab-Israeli collaboration until the Israeli–Palestinian conflict can be resolved.

“Arab-Israeli deals (like the Free-Trade Agreement) will not reach their full potential without resolving the root causes of the Arab-Israeli conflict,” he says.

Here are more must-read stories from TIME

Reach out to usAt


Related Articles

Back to top button