The economic relationship between Israel and the UAE has advanced considerably since the signing of the Abraham Accords. Economic considerations are likely to assume greater strategic value as other aspects of the relationship are tested.
The Israeli–Emirati economic relationship has grown quickly since the signing of the Abraham Accords. This is perhaps unsurprising given the synergies between the two countries across a broad range of sectors, including finance and investment, education, healthcare, technology, energy, agri-tech, food and water security. Both countries seek to foster stronger partnerships across those sectors to promote domestic resilience and regional economic integration, as well as global interconnectivity.
Israel and the UAE view cooperation as a way to support their domestic industries in the short term but also achieve long-term sustainability. Israel can benefit from the UAE’s trans-shipping infrastructure to enhance its existing trade connections with Asian countries, including India, which is a key importer of Israeli and Emirati products. The UAE represents nearly 1.5 per cent of global trade and 2.4 per cent of the global oil trade. Moreover, the UAE can help Israeli companies market their goods to countries that do not have formal relations with Israel, although in reality such products have long managed to find a route to many of those markets.
Israel offers the UAE opportunities to invest in, and access to, technology. Of particular interest to the UAE are Israel’s advanced research and development capabilities in areas including healthcare, finance, technology, energy, security and defence. Dubai FDI, for instance, has already conducted industry-specific investment webinars with potential Israeli investors to explore opportunities and partnerships offered by the emirate in these sectors.
While business ties will no doubt strengthen bilateral relations and create co-dependencies, efforts to bring in additional investors have created important trilateral and multilateral ventures. Trilateral and multilateral ventures hold the potential to supercharge Israeli and Emirati exports to much larger markets, such as India and China, and to further embed the partnership between Israel and the UAE.
Although it is difficult to capture the full extent of economic activity since Israel and the UAE signed the Abraham Accords, Chapter 5 offers an account of major agreements and deals reached between businesses in both countries and, in some cases, third countries. It is clear, though, that the nature of the relationship differs markedly from Israel’s relationships with Egypt and Jordan. Whereas local businesses in Egypt and Jordan continue to face boycotts for dealing with Israel, and often require the ‘cover’ of their militaries and governments to do business with Israel, many Emirati businesses have shown a willingness to work openly with Israeli partners. Moreover, unlike Egypt or Jordan, the UAE has provided a welcome and hospitable embrace to Israeli businesspeople and visitors. Furthermore, in October 2020 Israel and the UAE implemented a visa exemption agreement, the first – and so far only – such agreement between Israel and an Arab country.
The following sections survey the emerging business landscape since the signing of the Abraham Accords in September 2020. The sections focus on finance and investment, energy, technology and defence, education, healthcare, and food and water security.
Finance and investment
Israel’s first free trade agreement (FTA) with an Arab state was agreed with the UAE on 31 March 2022. The FTA – which was formally signed into effect on 26 March 2023 – eliminates most tariffs on trade between the two countries, and is expected to increase annual bilateral trade from $1.2 billion in 2021 (according to official Israeli data) to over $10 billion by 2027. Most duties were eliminated immediately, while others will be removed over a three- to five-year period. Meanwhile, remaining tariffs on goods including food, medicine, diamonds, jewellery, fertilizers and other chemicals have been reduced.
The FTA is the foundation of the Israeli–Emirati economic partnership, and is seen on both sides as an essential part of embedding and sustaining normalization. Emirati minister of state for foreign trade Thani Al Zeyoudi stated that ‘… our agreement will accelerate growth, create jobs and lead to a new era of peace, stability, and prosperity across the region’. And Israel’s economy and industry minister Orna Barbivai said:
Since the accords, government agencies from Israel and the UAE have worked closely together to create an enabling environment to attract and facilitate investment flows. For example, in September 2020, the two countries’ central banks established a cooperation agreement and signed memorandums of understanding (MoUs) defining banking and finance protocols between the two countries. During the same month, Israel’s Bank Hapoalim and Dubai’s largest bank, Emirates NBD, agreed to promote investment and facilitate transfers and, most importantly, to allow Israelis to transact directly with the UAE. The following month, Israel’s Export Institute and Bank Hapoalim sent 250 Israeli entrepreneurs to Abu Dhabi and Dubai to promote investments. These developments were far-reaching, as they actively encouraged and supported direct engagement between Israelis and Emiratis. Then, in November, export credit agencies Israel Foreign Trade Risks Insurance Corporation and Etihad Credit Insurance signed a cooperation agreement to help facilitate investment, trade and exports. In a matter of months, the Abraham Accords represented an upgraded model of normalization that went far beyond that envisaged in previous Israeli–Arab agreements.
However, the economic dimension of the Israel–UAE relationship has encountered some difficulties due to a range of factors, including differences in business practice, miscommunications, cultural dissonance and political turbulence. For instance, in March 2021, the Israeli and UAE governments announced the creation of a $10 billion fund to encourage investment in strategically important sectors in Israel, including energy, manufacturing, water, space, healthcare and agri-tech. However, the fund was frozen in July 2021 owing to political turbulence in Israel, where four inconclusive general elections were held in two years. Although the freeze was lifted in early 2022, a paucity of major infrastructure projects has meant that no major investments have been made since this time.
Notwithstanding, the number of agreements signed within record time and the enthusiasm of government agencies to sponsor cooperation on finance and investment gives a clear indication of just how willing Israel and the UAE are to expand relations. Authorities in both countries have sought to foster the cross-fertilization of investment opportunities and to encourage the creation of joint initiatives, even when markets are saturated or opportunities are limited.
Energy
US-driven energy diplomacy in the region has helped integrate Israel’s energy system with Egypt’s natural gas domestic and export markets and Jordan’s domestic natural gas market. This decade-long process laid the foundations for Israel and the UAE to work together not only in developing Israel’s natural resources in the eastern Mediterranean, but also in combining their energy interests with Jordan, as detailed below. More importantly, the Abraham Accords gave a boost to US energy diplomacy, which, under the guidance of US special envoy and coordinator for international energy affairs Amos Hochstein, brokered a deal on maritime boundaries between Israel and Lebanon (and, in reality, Hezbollah) in late October 2022. It was Israeli–Emirati normalization that cleared the path for Lebanon – and, by extension, Hezbollah – to tacitly recognize Israel and reach a compromise that served both Israeli and Lebanese economic interests. In other words, Israel and Lebanon were able to put aside their long-standing hostilities and opposing world views to participate in a mutually rewarding transaction. This agreement constitutes a major break – but not necessarily breakthrough – in regional diplomacy, and is a tangible example of just how the Abraham Accords have challenged the MENA status quo and changed the calculations of regional actors.
In the meantime, Israel and the UAE have advanced their bilateral energy relations rapidly. The eastern Mediterranean holds significant natural gas reserves, albeit small in comparison with other major world basins or fields. The rapid development of Israeli (15.5 billion cubic metres per year) and Egyptian (70.5 billion cubic metres per year) gas fields has transformed regional energy dynamics and benefited the so-called ‘normalization states’ – or at least their political elites – economically, while also deepening their interdependencies. This process resembles a textbook example of a peacebuilding exercise. Furthermore, the Abraham Accords have opened opportunities for Emirati investment.
In December 2021, Abu Dhabi’s Mubadala Petroleum took a 22 per cent stake in Israel’s Tamar gas field for $1 billion, representing the largest commercial agreement signed between Israel and the UAE. The deal is not just an economic proposition. It is also a strategic investment, as it ties together both countries’ long-term interests in the natural gas industry and provides Abu Dhabi with a direct route to the European gas market. It also opens opportunities for the UAE to take stakes in other Israeli assets, such as the giant Leviathan gas field (should other operators exit that project). Moreover, the investment fits with Mubadala Petroleum’s investment strategy to take positions in upstream energy projects in multiple geographies to extend the shelf-life of hydrocarbons and leverage its cash-rich position.
In December 2021, Abu Dhabi’s Mubadala Petroleum took a 22 per cent stake in Israel’s Tamar gas field for $1 billion, representing the largest commercial agreement signed between Israel and the UAE.
Not all such investments have gone smoothly, though. The travails of the Med–Red Land Bridge project highlighted how differences in the two countries’ political systems can frustrate their economic ambitions, even if strong political will exists among their respective leaders. Israel’s democratic environment and policy process can frustrate the ambitions of senior Israeli politicians, whereas MbZ can impose decisions without facing institutional resistance or opposition from pressure groups or civil society.
Signed in October 2020, Med–Red – which would enable Emirati crude to reach Western markets through Israel – was the subject of the first major deal after the Abraham Accords were signed. The Israeli ‘land bridge’ transporting oil from Eilat on the Red Sea to Ashkelon on the Mediterranean had already been operating for more than 50 years. Based on available information on the Israeli–Emirati initial 10-year agreement, 50 to 70 oil tankers a year will be unloaded at Eilat port, transporting some 14 million tons of crude oil a year. However, the Israeli state-owned Europe Asia Pipeline Company (EAPC) is licensed by Eilat port to receive only 2 million tons of oil a year – the equivalent of 10 to 12 tankers. To address this gap and fulfil its commitment under the Med–Red agreement, EAPC informed officials at the Israeli environmental protection ministry that it intended to expand its operations by adding five to 10 tankers a year.
However, Israeli environmental campaigners opposed the agreement on two grounds: (i) that it had not been approved by the Israeli cabinet; and (ii) that it risked damaging the Red Sea and Eilat’s coastline because of oil spills or attacks. Therefore, the project was delayed until the Israeli High Court of Justice ruled in December 2021 that it would not block the agreement, although the court granted the environmental protection ministry the right to limit the volume of oil shipped through Israel. The delays caused by the legal challenge were a major source of frustration for the UAE and, as a means of pressuring its Israeli counterparts, Emirati officials considered the idea of building a pipeline in Egypt as an alternative to Med–Red.
This episode reveals stress points in the relationship between Israel and the UAE, and points to possible future limitations on cooperation. Even where Israeli and Emirati interests align, Israel’s political process could frustrate and even prevent joint projects from advancing. Although it is well beyond the scope of this paper to consider the likely trajectory of Israel’s domestic politics, that political process is undergoing its own transformation, with the government of Benjamin Netanyahu challenging the independence of state institutions – notably including the judiciary.
One area within the energy sector where Israel and the UAE are closely aligned is ‘clean’ energies. Their complementary offerings of innovative, private sector-led businesses and government-backed entities with oil-rich budgets gives both an advantageous position from which to develop, deploy and export renewable energy technologies to the Middle East and beyond. For example, the strategic partnership between Mubadala Petroleum’s ‘clean’ energy arm Masdar and an Israel-based subsidiary of France’s EDF offers opportunities to pursue renewable projects worldwide. EDF Renewables Israel operates 27 solar installations in Israel, with a total capacity of nearly 490 megawatts (MW), and intended to commission six other projects by the end of 2022, including a floating solar farm in northern Israel. Masdar and EDF Renewables are also jointly invested in projects in the UAE, such as the Al Dhafra solar project in Abu Dhabi (which will be the largest single-site solar plant in the world on completion) and the 800-MW third phase of Mohammed bin Rashid Al Maktoum Solar Park in Dubai. Projects elsewhere in the region include the 400-MW Dumat Al Jandal wind farm project in Saudi Arabia.
The multilateral dimension of the partnership is a new development for the region. It points to a qualitative difference in the nature of the Israel–UAE relationship compared with Israel’s earlier relationships with Egypt and Jordan in terms of mutual benefits. For example, while the Israeli subsidiary of EDF Renewables benefited from Masdar’s partnership with EDF energy projects, Israel’s Ecoppia has brought similar benefits to the UAE, in partnership with India, by exporting water-saving robotic technology to Dubai.
This approach to relationship-building will help anchor the Abraham Accords against the stresses and strains in bilateral ties, as well as the challenges that arise from the regional environment. Israel’s relations with Egypt and Jordan have also endured, but ties with the UAE will go further in shaping the region’s security environment. For example, the US-guided Prosperity Green and Prosperity Blue projects provide clear examples of a nascent regional architecture, based on the Abraham Accords, that draws on other ‘normalization’ states.
Prosperity Green will see solar photovoltaic (PV) plants with a generating capacity of 600 MW built in Jordan by 2026, with the clean power produced exported to Israel. With funding and technological expertise provided by Masdar, the deal will contribute towards Israel meeting its renewable energy targets and diversifying its energy mix. Proceeds from the sale of electricity will be divided between Masdar and Jordan. In return, as part of Prosperity Blue, Israel has committed to evaluate the supply to Jordan of up to 200 million cubic metres of desalinated water.
The agreement between Israel, Jordan and the UAE on these projects serves different purposes for each party. For Jordan, the threat of water shortages is severe and, therefore, the tripartite agreement provides it with a critical resource. By encouraging a compromise between Israel and Jordan, especially on sensitive subjects such as access to shared water resources, the UAE has showcased its value as a diplomatic broker to the US and other regional players. It also establishes a materially beneficial relationship with Jordan, and helps its new partner in Israel to further its relationships with neighbouring countries. Meanwhile, Israel can reach its renewables targets, demonstrate its value to the UAE, and work constructively with Jordan despite ongoing tensions over the status of Jerusalem.
Technology and defence
Cooperation on technology and defence will be the bedrock of the future Israeli–Emirati relationship. The UAE and Israel are both major tech hubs. Israel specializes in AI, blockchain, cybersecurity and quantum computing, while the UAE holds a comparative advantage in digital transformation and smart cities, plus wide-scale deployment capability. The UAE is important as a source of investment for Israeli technology companies, and as a staging post for exports to the MENA region and to Asian markets. As the focus of both countries on regional security and the examples below might indicate, Israel’s defence industry is the big winner from the Abraham Accords.
In March 2021, the UAE’s state-owned EDGE Group agreed an MoU with IAI to develop an advanced C-UAS (counter-unmanned aircraft system) tailored to the UAE market and the wider MENA region. EDGE agreed that it would leverage its subsidiary, SIGN4L, to collaborate with IAI. Using a combination of SIGN4L and IAI products, the C-UAS comprises detection and identification systems (radar and optics, radio frequency), ‘soft kill’ solutions (jamming, cyber takeover) and ‘hard kill’ capability (guns, missiles, electromagnetic and laser-based weapons), and advance command and control. In November, EDGE and IAI signed a second MoU to jointly develop a first-in-class series of 17-metre USVs for the entire range of military and commercial applications, including carrying out anti-submarine warfare and submarine detection operations.
Meanwhile, in April 2021, Israel’s state-owned Rafael Advanced Defence Systems, Silicon Valley-based private equity firm Silver Lake and Abu Dhabi-based tech firm Group 42 (G42) established a research and development site in Israel. Alongside this, G42 was the first UAE company to open an international office in Israel. This entity will commercialize AI and ‘big data’ technologies to develop products for the banking, healthcare and public safety sectors to be sold in Israel, the UAE and worldwide. The G42–Rafael partnership is both strategic and economic, as it closely ties the interests of the two countries together, aligning both tech and defence industries. Given that G42 is chaired by UAE national security adviser Sheikh Tahnoun bin Zayed Al Nahyan, the arrangement also gives a clear indication of both the closeness of government-to-government relations since the Abraham Accords and the proximity of Abu Dhabi’s ruling family to the Israeli political and security establishment.
Education
Although online learning is now widespread, education is still largely based on person-to-person interactions, historical and cultural frames of reference, pedagogies and the synchronizing and disaggregation of ideas and philosophies. It is unsurprising, then, that the pace of change described in sections above has not been matched in the area of education, although there is a desire from the UAE leadership to foster exchange programmes and to learn from Israel’s record of intellectual achievements.
However, to date, there have only been two significant advances. First, an academic partnership between the University of Haifa in Israel and the UAE’s Zayed University. In November 2021, the two universities also signed an MoU, agreeing to undertake joint research projects (particularly in the field of environmental sciences), facilitate university-wide knowledge exchanges and share best practices. In the same month, the Israeli and Emirati ministries of education signed an MoU on cooperation in education, as part of which it was agreed to form a joint committee to promote coordination between educational institutes in both countries, including general, higher, technical and vocational colleges. The significant number of students from each country who study abroad has made implementing the arrangements of mutual visits, training courses, events, conferences and student exchange programmes relatively easy.
The education dimension of the Israeli–Emirati relationship will grow at a much slower pace than other areas, and will likely be influenced by the UAE population’s hesitancy in engaging with Israeli institutions. While enforcement of the Arab boycott against Israel has long since been relaxed, education remains one area where Arab academics and students alike could possibly seek to resist normalization.
Healthcare
Meanwhile, healthcare is another area of the Israel–UAE relationship that has advanced at a rapid pace in recent years. This advance has been partly a response to the global COVID-19 pandemic, as well as the UAE’s desire to serve as a healthcare hub between Asia, Europe and North America. As such, the UAE aims to leverage its relationship with Israel to position itself as the medical research and development hub in the region and, by doing so, establish a lead in healthcare before other regional players seek similar normalization agreements with Israel.
Cooperation has been notable in medical research, healthcare provision, consultations, data infrastructure, medical-to-military support, training and medical tourism. For example, in August 2020 Israeli firm Pluristem and Abu Dhabi’s Stem Cells Centre signed a non-binding cooperation agreement to develop therapies for diseases, share samples, and combine use of equipment and testing. The two firms also agreed to collaborate in the areas of cell therapy and regenerative medicine. What is striking about this agreement is that it was reached just before the Abraham Accords were signed, and was initiated by the Indian think-tank Better Alternatives.
Cooperation on professional training, medical tourism and COVID-19 treatments, including remote treatment, formed the basis of a preliminary agreement signed by Sheba Medical Center (Israel) and APEX National Investment (UAE) during September 2020. The establishment of an Israeli-operated clinic in Dubai was a breakthrough in medical provision, as it amounted to a form of people-to-people engagement, though it is unclear how many members of staff at the clinic will be Emiratis. The integration of Israeli medical research and healthcare provision into Emirati hospitals and health centres is considered an important part of normalizing interaction at the local level, in a way that directly affects families in the UAE and the Gulf Arab states.
The integration of Israeli medical research and healthcare provision into Emirati hospitals and health centres is considered an important part of normalizing interaction at the local level, in a way that directly affects families in the UAE and the Gulf Arab states.
Both deals show that, even before the accords, medical professionals in each country already shared a desire to cooperate and jointly address research challenges.
Agreements in the healthcare sector continued after the signing of the Abraham Accords. In late October 2021, the Israeli and Emirati ministries of health agreed to recognize one another’s COVID-19 vaccination certificates leading to both countries agreeing procedures for unrestricted movement of vaccinated individuals. This initiative was intended to facilitate continued travel between the two countries during the COVID-19 pandemic.
Food and water security
Water and food security are policy priorities for both Israel and the UAE, owing to the regional context and growing competition for resources amid the threat of climate change and the increasing scarcity of water.
Both countries consider food insecurity, which increased during the COVID-19 pandemic and, latterly, following Russia’s February 2022 invasion of Ukraine, to be a major threat. Hence, Israel’s ministry of agriculture and rural development and the UAE’s ministry of food and water security reached an agreement on agricultural cooperation in July 2021. The ministries committed to work together to identify expertise, technologies and best practices in the food value chain. Their agreement marks a decisive shift away from the UAE’s earlier practice of mitigating against the threat of food insecurity by investing in farmlands in littoral states on the west coast of the Red Sea, a policy that resulted in limited success.,
A partnership agreement on water security between Abu Dhabi-based agribusiness firm Bayunah and Israeli water tech firm Watergen is another example of where businesses from both countries are investing in long-term water solutions. The focus on the long term gives a clear indication that partners in both countries view the partnership as enduring rather than merely tactical.
Although economic relations between Israel and the UAE started from a low base in 2020, they have advanced at pace since then and have brought together entities in both public and private sectors. Given a strong push from the UAE leadership and an energetic pull from the Israeli private sector, both countries have leveraged their comparative advantages and developed sustainable partnerships in many strategic sectors of their economies. As such, the economic aspect of the relationship will not only help the partnership endure should circumstances change and place bilateral ties under severe pressure, but it will also likely catalyse a new era of economic relations among other states in the MENA region.
