NEXT LEVEL OF BUISINES RELATION BETWEEN ISRAEL AND GCC COUNTRIES

NEXT LEVEL OF BUISINES RELATION BETWEEN ISRAEL AND GCC COUNTRIES

By: Samuel shay, October 2022

The emergence of GCC-Israel relations in a changing Middle East

This dynamic has taken on a strong strategic imperative for the Gulf side, in particular, in a region beset by widespread uprisings and civil war, shifting geopolitical alignments, and the competitive pressure between rival coalitions seeking to broaden their spheres of influence and accomplish goals in weak and fractured states of the region. The intractability of the Israeli-Palestinian issue has long prevented official relations with Israel, but the Gulf nations now have more freedom to put their national interests ahead of "Arab" ones due to the Palestinian national movement's weakened ibility to influence regional affairs.

Although the diplomatic agreements that the United Arab Emirates (UAE) and Bahrain signed with Israel in 2020 marked a milestone in ties, the Gulf nations and Israel have long maintained channels of contact and collaboration. Several nations in the area developed relations with Israel, notably Qatar, Bahrain, and Oman. The red line forbidding an alliance with Israel among the Arab governments was softened, despite the fact that peace between Israelis and Palestinians was never fully achieved. After Oslo, relations grew covertly and covertly as a result of the Arab public's enduring taboo against normalizing relations with Israel while the Palestinian people are still subject to Israeli occupation.

These backchannel connections naturally grew more apparent in recent years as the two parties increased their collaboration. As the Gulf states sought Washington's approval, publicity also became an increasingly important goal. This helped pave the way for the historic normalization agreements between the UAE and Bahrain and Israel that were signed at the White House on September 15, 2020 and collectively known as the "Abraham Accords." The Gulf Cooperation Council (GCC) is not, however, a unifying group, and the nature and extent of relations with Israel differ across the Gulf states.

Saudi Arabia shares strategic motives with the UAE and Bahrain in regards to Israel as a member of this axis of like-minded nations pursuing coordinated foreign policy goals. Although Riyadh and Tel Aviv have been working together discreetly for years, mostly on security and intelligence-sharing matters, the Gulf state has its own considerations when it comes to its willingness to formally establish relations. This includes the legitimacy that the House of Saud must uphold in its position as the keeper of the two holiest sites in Islam, which is unique in the Islamic world. The nation is also considerably bigger and more diversified than its peers, with significant populations that have negative opinions of Israel. However, the political establishment is signaling, particularly the younger generation led by Crown Mohammed bin Salman, is clearly trending toward a different approach to Israel that does not preclude normalizing ties ahead of an Israeli-Palestinian peace deal.

Drivers of a New Approach

Perhaps the UAE's goals best capture the shifting regional dynamics of all the Gulf governments pursuing relations with Israel. The UAE maintains that Israel is neither an adversary nor a threat to regional stability, in contrast to the historical normative view of Israel in the Arab world. The main risks to the UAE and its allies, in the perspective of Abu Dhabi's Crown Prince Sheikh Mohammed bin Zayed Al Nahyan, who has served as the de facto ruler of the emirate since his elder brother, the emir, suffered a stroke, are a nuclear-armed Iran and transnational political Islamists. In this situation, both of these evil entities have shown a willingness and capacity to use regional unrest to promote their agendas by interference from abroad or, in the case of Iran, direct engagement the democratic process—in the case of the Muslim Brotherhood and its affiliates, who are backed by a rival coalition headed by Turkey and Qatar. In contrast, the UAE views Israel as a formidable regional power that shares these views and is willing to act forcibly to counter regional adversaries. A formal alliance with Israel, therefore, makes strategic sense. So, while the normalization agreements were billed by the Trump administration, which brokered them, as peace accords, they were clearly driven by coalition-building rather than peace building.

Economic Relations Between Israel and the Gulf States

Israeli ties with Arab nations have changed significantly since the Abraham Accords. Along with advantages for the military and security, the normalization process opened up new opportunities for the expansion of business partnerships. These benefits have already materialized. The accords are expected to meet very high expectations by the Israelis. The UAE and Bahrain are on the Israel-Gulf States track, which has witnessed the most advancements to yet. Similar to how their political and military/security interactions significantly affect the alignment of forces in the area, their economic relations with one another modify the network that previously existed in the Middle East.

Trade and investment

The expansion of relations with the Gulf states, particularly the UAE, is the most vigorous of the Arab nations that signed the Abraham Accords with Israel in the previous two years. They now have more prospects for trade between them because to the restoration of their diplomatic ties. Expert community indicated that Israel and the UAE have informal relations as part of economic, cultural, and political contacts till 2020. It should be recalled that Israel provided its security technology, including cyber security and monitoring, to the Emirates even before the accords. They might also communicate with one another on a small business level. This has a significant impact because more than 90% of Israeli businesses are tiny and medium-sized. Additionally, it's probable that Israeli goods, notably those in the information technology sector, were sent to Arab states via other nations and used there (partially through Jordan and Turkey, but mostly through non-MENA states, including various European countries, according to assessments published by the Tony Blair Institute for Global Change).

Prior until now, Arab countries in the Persian Gulf had shown a strong interest in purchasing Israeli technologies. Due to the arid environment of these nations and their current inability to adequately secure their food security, irrigation technologies were particularly crucial. It should be emphasized that the purchase of technology by a Gulf nation may open doors for others through parallel imports into other nations' marketplaces. It is possible to follow the establishment of relations between Israel and Arab states of the Persian Gulf through investment projects, the growth of trade turnover and the construction of new logistics chains.

The expansion of commerce with the UAE was the most important; from $58.8 million in 2020 to $384 million in 2021, Israel's exports of goods to the UAE. In 2020 and 2021, respectively, Israel imported $120 million and $836.9 million worth of goods[iii]. The fact that exports climbed by 6.5 times while imports increased by 6.9 times shows that there has been a significant growth in the amount of bilateral foreign commerce. It is valuable to contrast this information with overall export/import figures. Israel's exports of products grew from $50.8 billion in 2020 (a little less than in 2019, which totaled $58.3 billion owing to the pandemic's effects), to $50.8 billion in 2019, according to the Central Bureau of Statistics for Israel and the Observatory of Economic Complexity to $60 billion in 2021.

Joint energy projects

Another area of interest for Israel and the Emirates is energy initiatives. Due to a number of military, geopolitical, economic, and energy challenges it prioritizes, the UAE is very active in expanding its relationships with nations in the Eastern Mediterranean. It initially wanted to take part in the EastMed Gas Forum (with participation from Egypt, Israel, Jordan, the Palestinian Territories, Cyprus, Greece, Italy, and France, and observer status for the European Union and the United States), but the Palestinian Authority later vetoed the Emirates' observer status.

A deal to transport oil from the United Arab Emirates to the Eastern Mediterranean via the Israeli pipeline between Eilat and Ashkelon was struck at the same time by the Israeli Europe Asia Pipeline Company and the jointly owned Emirati-Israeli MedRed Land Bridge Company. This was seen as a significant strategic success. Despite this, the likelihood of its execution is quite slim because a number of Israeli ministers opposed it and the Israeli government ultimately decided against approving it due to environmental concerns.

Bilateral energy agreements have been effective in the past. The Tamar gas field, which is located in the Israeli exclusive economic zone (EEZ) in the Mediterranean Sea and was formerly held by Delek Drilling, has been bought by Mubadala Petroleum, a division of Mubadala Investment Co., for a 22% share. The Israeli Ministry of Energy gave its approval to this agreement in December 2021. According to its spokespeople, the deal "would help to the activity of the leases and open a door to partnership with firms who in the past avoided working in Israel for geopolitical concerns," in addition to seeking competitiveness in the Israeli energy market. After the Abraham Accords, this is regarded as the largest business agreement that Israel and the Emirates have ever made.

Security and the international context

Bahrain was the first Gulf nation (and the second Arab nation after Morocco) to sign a defense cooperation pact with Israel in the first quarter of 2022, despite the economy's generally poor progress. Additionally, Manama has declared its intention to buy radar and anti-drone technology from a firm connected to Israel Aerospace Industries. It is undoubtedly in both countries' interests for there to be more military and security cooperation between the UAE and the Jewish state. It was revealed in November 2021 that Israel Aerospace Industries and UAE-owned defense firm EDGE had inked a contract to collaborate on the building of autonomous ships that could be utilized for both military and commercial reasons and could engage in anti-submarine warfare.

Israel signs historic trade deal with UAE, its biggest with any Arab country

United Arab Emirates: DUBAI Tuesday saw the signing of a multibillion-dollar free trade agreement between Israel and the United Arab Emirates, the most recent result of the Abraham Accords, a historic normalization pact between the two nations that was signed in 2020. The trade pact is the largest ever between Israel and any Arab country, with a declared goal of expanding yearly bilateral commerce to more than $10 billion over the following five years. According to Israel's finance minister, it accounts for 96% of the $885 million in commerce between the two Middle Eastern nations last year.

That bilateral figure is more than twice as large as Israel's trade with Egypt in 2021, which was $330 million, despite the fact that Israel and Egypt have had a peace agreement in place since 1979. This shows the sheer speed and scope of trade between the UAE and Israel that has taken place since the two countries established official relations in August of 2020. Following months of discussions, the agreement was signed in Dubai by Orna Barbivai, Israel's Minister of Economy and Industry, and Abdulla bin Touq Al Marri, the UAE's Minister of Economy.

Thani Al Zeyoudi, the Emirati trade minister, remarked on Twitter that the signing marked the beginning of "a new chapter in the history of the Middle East." "Our deal will spur economic expansion, generate employment, and usher in a new age of regional peace, stability, and prosperity." The CEO of the crowdfunding website OurCrowd and a venture capitalist in Israel's digital industry, Jon Medved, believes that building trust between the two nations is essential to attracting additional investment.

Before the agreement was signed, Medved told CNBC's Dan Murphy, "Trust is not something you can establish in a month or two, but I think there is great goodwill." His business has already made investments there, employed Gulf workers, and been granted regulatory status by Abu Dhabi Global Market, a UAE free zone. Numerous Israeli nationalists were detained for using tear gas on a Palestinian journalist as they approached the Al-Aqsa compound in Jerusalem, the third holiest place in Islam, on Monday while screaming anti-Muslim epithets. The crowd of protesters had assembled to mark the anniversary of Israel's seizure of Jerusalem's Old City during the 1967 Six-Day War.

The UAE’s foreign ministry in a statement Monday condemned what it described as the “storming” of the Al-Aqsa compound by “extremist settlers under the protection of Israeli forces.” It also asked that Israeli authorities “take responsibility for reducing escalation and ending all attacks and practices that lead to the continuation of tensions.”

UAE seeks $1 trillion in economic activity with Israel by 2031

Reuters, September 14, DUBAI - In order to collaborate on everything from healthcare to climate change and energy, the United Arab Emirates wants to increase the value of economic engagement with Israel to more than $1 trillion over the next ten years, according to the UAE economics minister. In the year after it became the first Arab nation to restore relations with Israel this century, the Gulf Arab state has signed scores of memorandums of understanding with its new friend.

In order to collaborate on everything from healthcare to climate change and energy, the United Arab Emirates wants to increase the value of economic engagement with Israel to more than $1 trillion over the next ten years, according to the UAE economics minister. In the year after it became the first Arab state to normalize relations with Israel this century, the Gulf Arab state has signed scores of memorandums of understanding with its new friend. It was not immediately obvious how the two nations anticipate their economies would grow to $1 trillion in the coming ten years. The gross domestic output of each nation is around $400 billion.

According to the minister, Abdulla Bin Touq Al Marri, there is between $600 million and $700 million in bilateral commerce between the UAE and Israel. It was "an achievement by itself" to reach that level in a single year, he added. He said that they are "going into so many sectors of economic potential" and that they "are trying to produce over $1 trillion of economic activity over the next decade." Israel estimates that it will trade with the UAE for $1 billion by the end of 2021 and $3 billion over the following three years, significantly less than the UAE's $24 billion in exports to its biggest customer, Saudi Arabia, in 2019.

According to Adiv Baruch, former head of the Israel Export Institute, "a new window of opportunity has opened since that accord, and the economy is altering the face of the area and will create a diplomatic infrastructure for developing relations between us." The mission is aimed at businesses in the construction, manufacturing, and smart transportation industries as well as businesses identified by the UAE as having high tech collaboration potential. According to official Israeli data, Israel and the UAE traded $610 million worth of commodities in the first seven months of 2021, with the UAE sending Israel $400 million worth of diamond exports.

UAE, Israel signs MOU to cooperate in agriculture

A Memorandum of Understanding (MoU) for agricultural cooperation has been signed between the UAE Ministry of Climate Change and Environment (MoCCAE) and Israel's Ministry of Agriculture and Rural Development. The five-year agreement calls for the ministries to work together to develop and share knowledge, best practices, and technology in order to increase the quantity and quality of agricultural products and improve the sustainability of crop and livestock production, according to official news agency WAM.

In accordance with their policies for food safety and animal health, they also want to increase bilateral commerce in agricultural and animal goods. A joint committee will be formed, and it will have regular meetings to assess the collaboration's progress, determine priorities, and create action plans for specific projects. In addition, they will promote technical cooperation, particularly in applied R&D in agriculture and beekeeping, as well as conduct joint training sessions for researchers and experts in agriculture and food safety, according to a statement. They will also work to have both countries' organic farming standards recognized.

"Due to their dry desert environments, the UAE and Israel confront similar problems in creating sustainable, climate-resilient agricultural sectors and enhancing food security," said Mariam bint Mohammed Almheiri, UAE Minister of Climate Change and Environment. To assist us in achieving our shared objectives, our new alliance seeks to start a lively exchange of experience and knowledge in these fields. Israel is a pioneer in technological innovation; therefore, we especially anticipate fruitful cooperation in this area. "Over the years, Israeli agriculture has consistently been cutting edge and inventive. This new agricultural partnership between our two nations will result in quicker and better responses to some of the regional concerns we face together, like food security and climate change, Oded Forer, Minister of Agriculture and Rural Development of Israel.