Opinion |

The UAE Needs Israel More Than Israel Needs the UAE

What the Emiratis can offer – oil, investment and arms deals – are worth less these days than the tech and tourism that Israel can provide

Send in e-mailSend in e-mail

You can imagine the late Shimon Peres smiling down from the beyond as Donald Trump announced last week that Israel and the United Arab Emirates were establishing diplomatic ties.

This isn’t a peace agreement like the others Israel has reached or hopes to one day, aimed at ending a real state of war. Normalization with the UAE is less about making peace and more about confronting Iran and doing business.

In that way, it fits neatly into Peres’ vision of a New Middle East, where military conflict is replaced by economic and technological cooperation. Nothing like that emerged from the agreements Israel reached with Egypt and Jordan. Anyhow, the big oil powers until now rejected normalization, so there were no oil profits to leverage.

Is there any reason to be more optimistic this time? As has been widely noted, the Middle East has undergone a political sea change since Peres articulated his vision in the heyday of the Oslo accords of 1993. The Palestinian cause is no longer the core issue; these days, it’s Iran and Islam.

The economics of the region, or more precisely that of the Gulf oil powers, have changed, too. Peres’ vision was built on a Middle East where Arab oil wealth would team up with Israeli know-how to spread its bounties across the region. Today, if anything, Israeli technology prowess has grown to dimensions Peres could hardly have imagined in the early 1990s. But Arab oil wealth isn’t what it was.

The UAE’s oil revenues have been on the decline since prices crashed in 2014. This year, they are expected to plummet 30% due to the coronavirus, and no one is counting on them to rebound to the days of glory. Even when the world economy recovers from the pandemic, renewables and natural gas will be supplying increasing shares of the energy demand at the expense of petroleum.

The Gulf oil exporters are as aware of this as anyone and are spending heavily to diversify their economies into technology, tourism and finance. Saudi Arabia has its Vision 2030 and Abu Dhabi, the biggest of the UAE emirates, has its Economic Vision 2030. Dubai, which has been running low on oil for a long time, is the furthest along of all: It gets only a tiny percentage of its GDP from petroleum; the rest comes from serving as a global logistics, financial and aviation hub as well as property development.

It’s hard to tell from the reams of PR material that emanate from the Gulf Corporation Council countries, but the diversification effort has for most of them a long way to go. Abu Dhabi still gets more than a third of its GDP from oil. Even before the coronavirus, Dubai’s real estate-driven economy had lost momentum. With many of the expats who comprise 90% of the population and drive the economy fleeing, recovery will be harder.

Israel isn’t going to come to the rescue of the UAE, but it does offer some important benefits.

First and foremost is high-tech. The Emirates is determined to build a Silicon Gulf, and Israeli startups and entrepreneurs could give a boost to the local tech scene, which is already made up mostly of expats anyhow. The Israeli Arabs pouring out of the universities, in particular, may see economic opportunities in the UAE that don’t exist elsewhere in the Arab world and serve as the bridge.

The second is tourism. Already talks about air links are underway. Israeli is a small market, but Israelis are big travelers and the UAE, for a while at least, will be as an exciting new destination to jaded Israelis who have been to Paris and Disneyworld many times over.

The third is education. Emiratis won’t be enrolling at Tel Aviv University anytime soon, but you can envision TAU opening a Dubai or Abu Dhabi branch, much as other foreign universities have. Israel’s reputation for tech and entrepreneurship would make an excellent selling point for a TAU degree.

In contrast to the Peres vision, the economic payback for Israel isn’t nearly as obvious.

The Gulf countries still have vast sovereign wealth funds and money to invest, but the sums are nothing like they were in the old days. Anyhow, Israeli is no longer in need of Arab capital because foreign investment is already substantial.

The UAE can be a new source of oil and a market for arms. But, again, the world has changed since Peres contemplated an Israeli-Arab partnership. These days oil is cheap and abundant – it’s a buyer’s market for the foreseeable future. As for arms, American companies won’t easily cede to Israel even a piece of such a lucrative market like the UAE, and they can count on Washington to back them on that. Ironically, normalization may spur even more U.S. arms sales to the Emirates because they are no longer deemed a threat to Israel.

In short, the economic balance of power has shifted. The UAE and the other Gulf countries need Israeli technology and tourism more than Israel needs their oil or their investment capital.

The question lying ahead is whether the Emiratis will use Israel to their advantage or not. Unlike selling oil and buying arms, technology and tourism are people businesses. No tech entrepreneur will do business in a place she can’t schmooze with investors and engineers. No tourist will visit a country where he feels unwelcome. It’s not enough that realpolitik required the UAE’s leaders to come to terms with Israel; Emiratis have to be on board as well.

My guess is that, with its cosmopolitan atmosphere, business-orientation and big expat population, the UAE is ready to do business. If so, expect a big, if somewhat ironic, grin by Mr. Peres from beyond.

Comments