The Abraham Accords opened a new page in Israeli relations with Arab states. Besides military and security benefits, the process of normalization brought new possibilities for broad development of economic relations. These advantages are already being realised. The Israelis’ expectations from the agreements are quite high. So far, the greatest developments can be seen on Israel-Gulf states track with the UAE and Bahrain. Economic relations between them change the network that existed in the Middle East previously, just like their diplomatic and military/security relations dramatically alter the alignment of forces in the region.
Trade and investment
Out of the Arab countries that signed the Abraham Accords with Israel in the last two years, the development of relations with the Gulf states, especially the UAE, is the most robust. To date, the normalization of their diplomatic relations opens up new opportunities for mutual trade. Until 2020, expert communities noted that there were unofficial ties between Israel and the UAE as part of economic, cultural and political exchanges. It should be noted that even before the agreements, Israel transferred its technologies to the Emirates in the field of security, namely cybersecurity and surveillance. They could also interact with each other at the level of small businesses. This played a serious role, since more than 90% of enterprises in Israel are small and medium-sized. It is also possible that Israeli products, including in the field of information technology, could have been used in Arab states, which received them through third countries (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[i]).
Arab states of the Persian Gulf have expressed great interest in acquiring Israeli technologies before. Irrigation technologies were especially important because of the dry climate in these states and since they do not have the opportunity to fully ensure their food security these days. It should be noted that the acquisition of technologies by country in the Gulf may lead to opportunities for others by way of parallel imports to their markets.
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.
Data clearly demonstrates an increase in the volume of mutual foreign trade by several scores, as exports increased by 6.5 times and imports by 6.9 times.
The most significant was the growth of trade with the UAE: exports of goods from Israel to the UAE have increased from $58.8 million in 2020 to $384 million in 2021[ii]. Israeli imports of goods, respectively, amounted to $120 million in 2020 and $836.9 million in 2021[iii]. This data clearly demonstrates an increase in the volume of mutual foreign trade by several scores, as exports increased by 6.5 times, and imports by 6.9 times. It is worth comparing this data with general export/import statistics. According to Israel’s Central Bureau of Statistics and the Observatory of Economic Complexity, Israel’s exports of goods increased from $50.8 billion in 2020 (a bit lower than in 2019, which amounted to $58.3 billion, due to the effect of the pandemic) to $60 billion in 2021. The import of goods showed an increase from $68 billion ($74.3 billion in 2019) to $92 billion[iv].
The agreement regulates trade in all types of products, tariffs, services, intellectual property rights, and the exchange of technologies.
The primary goods for export and import are diamonds, which is not surprising considering that these countries are the largest diamond centers of diamond trade in the Middle East. The share of diamonds in the total volume of Israeli exports is about 70%, while they account for 35% of imports. Various machine components and technological equipment are other major export items of Israel to the Emirates. In addition to diamonds, Israel imports a large volume of broadcasting equipment.
In 2022, an agreement on a free trade zone was signed between Israel and the Emirates. This is an unprecedented and so far only agreement of the like between Israel and any Arab state. Based on the provisions, the agreement regulates trade in all types of products, tariffs, services, intellectual property rights, and the exchange of technologies. About 90% of all goods are included in the list under the agreement and the duty on them will be abolished either immediately or gradually[v].
In the case of Bahrain, the strategic aspect prevails over economic considerations.
The case of Bahrain is somewhat different. Before the signing of the peace treaty, Israeli exports to Bahrain, according to the Observatory of Economic Complexity, amounted to $72,000 in 2020 while imports amounted to $16,000. To date, trade relations between the countries are gradually developing, although their scope can hardly be compared to that of Israeli-Emirati ones. According to the Israel Central Bureau of Statistics, in 2021, Israeli exports to and imports from Bahrain amounted to $3.7 million $2.8 million respectively[vi]. This can probably be explained by different priorities in Israeli-Emirati and Israeli-Bahraini relations: in the case of Bahrain, the strategic aspect prevails over economic considerations.
Saudi Arabia presents an interesting case. Despite not having been one of the official signatories of the Abraham Accords, it has evidently been one of its active offstage proponents. The Kingdom still does not have any official diplomatic and trade relations with Israel. It is reported however, that Affinity Partners, Jared Kushner’s private equity fund, is planning to invest money from the sovereign wealth fund of Saudi Arabia in Israeli enterprises[vii].
The Emirates also see opportunities in investing their funds in the Israeli market. For this purpose, a joint investment fund with assets totaling $12 billion was created. The purpose of the fund is to invest the resources in strategic sectors of the Israeli economy, such as agriculture, energy and healthcare[viii]. It was also decided to establish another joint Israeli-Emirati R&D fund, worth approximately $90 million, which would support collaboration on technological innovation[ix]. Mubadala Investment Co., an Emirati sovereign-wealth fund, invested around $100 million in six Israeli venture-capital firms. While this sum is not significant compared to the general assets of the company (equaling $250 billion), it is an important step in the direction of diversifying the Emirates’ economy[x].
While important in their own right, economic and other relations between Israel, the UAE and Bahrain can possibly boost the development of other Arab countries as well as their ties with the Jewish state. Shortly after the signing of the Abraham Accords, both Morocco and Sudan normalized relations with Israel. There is a possibility that relations with Israel will be “normalized” in the arena of business at least, which might bring benefits to the whole region by ways of making its countries more interconnected with each other.
Joint energy projects
Energy projects are another point of interest for both Israel and the Emirates. The UAE is highly active in developing its contacts with countries of the Eastern Mediterranean due to a range of military, strategic, economic and energy issues it prioritizes. Originally, it wished to participate in the EastMed Gas Forum (with Egypt, Israel, Jordan, the Palestinian Territories, Cyprus, Greece, Italy and France’s participation, and the European Union and the United States having observer status), although the Emirates’ observer status was later vetoed by the Palestinian Authority[xi].
At the same time the Israeli Europe Asia Pipeline Company and the jointly owned Emirati-Israeli MedRed Land Bridge Company signed an agreement to supply oil from the UAE to the Eastern Mediterranean through the Israeli pipeline between Eilat and Ashkelon. This was considered a major strategic achievement. Despite that, the chances of its implementation are rather low: a range of Israeli ministers spoke out against it citing environmental concerns, so eventually it was not approved by the Israeli government[xii].
There are examples of successful bilateral energy deals. Mubadala Petroleum, a part of Mubadala Investment Co., acquired a 22% stake in the Tamar gas field, which was previously owned by Delek Drilling, and is located in the Israeli exclusive economic zone (EEZ) in the Mediterranean Sea. This deal was approved by the Israeli Ministry of Energy in December 2021. Its representatives claimed that the agreement, along with pursuing competitiveness in the Israeli energy market, “will contribute to the activity of the leases and open a door to collaboration with companies that in the past avoided operating in Israel for geopolitical reasons”[xiii]. This is considered the biggest commercial deal reached between Israel and the Emirates after the Abraham Accords[xiv].
Another project which became possible thanks to the Abraham Accords was the agreement reached in November 2021 between Israel, the UAE and Jordan on building a solar plant on Jordanian territory. Its green energy will be purchased by Israel which, in turn, will sell desalinated water to Jordan. Israeli Energy Minister Karine Elharrar called this agreement “the most significant” since the countries signed a peace treaty in 1994[xv].
The Accords have opened new opportunities for cooperation between Israel and the Arab countries which were the first to make peace with it. This peace, however, has largely been “cold” to date, there having been no joint projects people-to-people exchanges. Circumstances for the current agreements are certainly very different. Still, while being one of the instruments that ease the realization of joint projects, the Accords might not be the only helpful factor. An important element is also the policy of the current Israeli government, which sees its role in strengthening the ties not only with “new friends” but also with old neighbors.
“Interconnectivity”
With the increase in trade turnover between the countries, new logistics chains began to appear, with large transport playing a significant role in this process. For example, the FedEx International Priority delivery of goods from the UAE to Israel has become available to the general public, which, according to the company, is the fastest service available between the two countries[xvi]. Another large transport company, DHL Express, has started providing a delivery service.
Emirates launched flights to Israel in June 2022, which is an important step to increase the regular flow of goods and tourists between the countries. Emirati FlyDubai, Etihad Airways, Wizz Air and Israel’s El-Al, Israir and Arkia Airlines are already operating direct flights between the two states[xvii]. There was a direct flight line opened between Tel Aviv and Manama, serviced by Gulf Air[xviii].
Probably even more important, however, is the fact that after the Abraham Accords were signed, Saudi Arabia approved the passage of all Israeli civilian aircraft through its airspace[xix]. It is a significant step for two main reasons. First, it increases the “interconnectivity” of the Middle East region, making transportation routes shorter, easier and cheaper. Second, it considerably shortens flight times (by two to three hours) from Israel to Asia, which for the reasons mentioned above strengthens Israel’s position in the global economic network. Before that, Israeli aircraft had to take a longer route around the Arabian Peninsula and along the Red Sea. Now, the way from Tel-Aviv to Beijing, Hong Kong, Bangkok or Tokyo, for example, is going to take from eight and a half to nine hours instead of eleven[xx].
As for developments in the tourism sector, the UAE became the first and so far only Arab country to reach an agreement for visa-free travel with Israel[xxi]. By October 2021, 250,000 Israelis visited the Emirates, according to a statement by Israel’s tourism minister[xxii]. The Jewish state, in turn, hopes to attract 100,000 Emirati tourists after it eased most of its COVID-19 restrictions in March 2022[xxiii]. In general, Gulf states are at the moment more attractive for Israeli tourists than Israel is for Gulf citizens. The reasons for this include the higher mobility of Israelis and their eagerness to visit Arab countries previously closed to them. In this respect, the factor of the unresolved Israeli-Palestinian conflict is likely to influence Gulf citizens more than the Israelis. In the case of Bahrain, tourism (as well as trade) is not developing with the same speed and in the same scope compared to the Israeli-Emirati relationship, despite the easing of several visa requirements, such as the introduction of an e-visa scheme.
Security and the international context
Despite the relatively slow pace on the economic front, Bahrain was the first Gulf country (and the second Arab one after Morocco) to sign a defense cooperation agreement with Israel in the first quarter of 2022. Manama has also announced that it is planning to purchase radar and anti-drone systems from a company affiliated with Israel Aerospace Industries[xxiv].
The UAE is also interested in developing military and security cooperation with the Jewish state, and this interest is certainly mutual. In November 2021, it was announced that UAE-owned defense company EDGE and Israel Aerospace Industries signed an agreement to jointly design unmanned vessels which could be used for both military and commercial purposes, capable of conducting anti-submarine warfare[xxv].
For the Gulf states, Israel is a voluntary and desirable contact that faces similar security concerns.
Concerns about Iranian activities in the region were one of the cornerstones of the Accords. At the moment, this takes priority over the Israeli-Palestinian conflict. For the Gulf states, Israel is not a necessary partner, as was the case with Egypt and Jordan, but a voluntary and desirable contact that faces similar security concerns.
Such developments, however, are not confined to the Middle East alone. During an online meeting of foreign ministers on 19 October 2021, Israel and the UAE together with India and the US decided to establish a quadripartite international forum for economic cooperation. According to a statement made by the Israeli Ministry of Foreign Affairs, the ministers discussed the development of joint projects in transportation, technology, maritime security, economy and trade[xxvi]. The forum is more of a framework at the moment rather than a fully functional organization. However, joint engagement in such international projects serves to strengthen the basis of bilateral relations, demonstrating that Israel and the Emirates’ common economic and geopolitical interests go far beyond the boundaries of the Middle East.
Conclusion
New bilateral relations are becoming an integral part of the economic, energy and logistical network of the region, which eventually serves the aim of deeper regional integration. There is a special significance to the Abraham Accords which are nowhere close to the “cold peace” which have existed between Israel, Egypt and Jordan. Economics in this case serves as a solid basis for political relations.
Can economic interests serve as a basis to strengthen the relationship between Israel and Arab states despite the Israeli-Palestinian conflict remaining unresolved? This is highly likely with the conflict becoming more and more marginalized on foreign policy agendas. While its solution does not disappear as a concern for Arab states, and will probably become more acute with flare-ups in violence, the region’s security concerns pushed it into the background for the time being.
Arab actors are becoming more and more pragmatic in their approaches towards Israel.
One thing can be certain: as time passes, Arab actors are becoming more and more pragmatic in their approaches towards Israel. Confrontation is destructive while cooperation brings significant mutual benefits. More than that, the deeper bilateral ties reach, the harder it is to cut them: this implies that relatively short-term challenges like the escalation of temporary conflicts is unlikely to destroy productive bilateral deals. In the long run, however, the unresolved Israeli-Palestinian conflict could remain a source of strain, which binds Israel to treating Palestinians with careful consideration.
[i] Assessing Israel’s Trade With Its Arab Neighbours. 14 August 2018. // Tony Blair Institute for Global Change. HTML: https://institute.global/advisory/assessing-israels-trade-its-arab-neighbours.
[ii] What does Israel export to United Arab Emirates? (2020) // OEC. HTML: https://oec.world/en/visualize/tree_map/hs92/export/isr/are/show/2020/.
[iii] Table D 1. – Trade Countries – Imports and Exports. // Israel Central Bureau of Statistics. HTML: https://www.cbs.gov.il/he/publications/doclib/2022/fr_trade03_2022/td1.pdf; What does Israel import from United Arab Emirates? (2020) // OEC. HTML: https://oec.world/en/visualize/tree_map/hs92/import/isr/are/show/2020/.
[iv] Table D 1. – Trade Countries – Imports and Exports. // Israel Central Bureau of Statistics. HTML: https://www.cbs.gov.il/he/publications/doclib/2022/fr_trade03_2022/td1.pdf; Israel. // OEC. HTML: https://oec.world/en/profile/country/isr.
[v] Ben-David Ricky. Israel, UAE ink ‘groundbreaking’ free trade deal, in 1st with Arab state. 31 May 2022. //The Times of Israel. HTML: https://www.timesofisrael.com/israel-uae-ink-groundbreaking-free-trade-deal-in-1st-with-arab-state/.
[vi] Israel Central Bureau of Statistics. HTML: https://www.cbs.gov.il/he/publications/doclib/2022/fr_trade03_2022/td1.pdf.
[vii] Nissenbaum Dion, Jones Rory. Jared Kushner’s New Fund Plans to Invest Saudi Money in Israel. 8 May 2022. // The Wall Street Journal. HTML: https://www.wsj.com/articles/jared-kushners-new-fund-plans-to-invest-saudi-money-in-israel-11651927236.
[viii] Shahwan Najla M. UAE and Israel: A normalization for economics. 25 March 2021. // Daily Sabah. HTML: https://www.dailysabah.com/opinion/op-ed/uae-and-israel-a-normalization-for-economics.
[ix] Berman Lazar. Israel approves multimillion-dollar joint R&D fund with UAE. 23 January 2022. // The Times of Israel. HTML: https://www.timesofisrael.com/israel-approves-multimillion-dollar-joint-rd-fund-with-uae/.
[x] Jones Rory, Lieber Dov. U.A.E. Just Invested $100 Million in Israel’s Tech Sector as Both Countries Get Closer. 14 January 2022. // The Wall Street Journal. HTML: https://www.wsj.com/articles/u-a-e-sovereign-wealth-fund-invests-100-million-in-israel-venture-capital-firms-11642164356.
[xi] Berman Lazar. With gas alliance moored to Turkey tensions, Israel tacks toward energy security. 15 March 2021. // The Times of Israel. HTML: https://www.timesofisrael.com/with-gas-alliance-moored-to-turkey-tensions-israel-tacks-toward-energy-security/.
[xii] Yaaron Lee. Israel’s Gantz Joins Opposition to UAE Pipeline Deal, but Bennett Will Make the Final Call. 9 December 2021. // Haaretz. HTML: https://www.haaretz.com/israel-news/.premium-israel-s-gantz-joins-opposition-to-uae-pipeline-deal-but-bennett-will-make-the-call-1.10453605?lts=1640111109491; Rinat Zafrir. Israel Tells Court It Won’t Revoke UAE Oil Pipeline Deal, but Might Set Restrictions. 16 December 2021. //Haaretz. HTML: https://www.haaretz.com/israel-news/.premium-israel-tells-court-it-won-t-revoke-uae-oil-pipeline-deal-but-might-set-restrictions-1.10473958.
[xiii] The Ministry of Energy announces: Final approval has been granted for the transfer of interests in the Tamar and Dalit production leases from Delek Drilling to two subsidiaries of Abu Dhabi company Mubadala Petroleum. 9 December 2021. // Ministry of Energy. HTML: https://www.gov.il/en/departments/news/press_091221.
[xiv] Israel’s Delek finalises sale of Tamar gas stake to Abu Dhabi’s Mubadala. 2 September 2021. // Reuters. HTML: https://www.reuters.com/world/middle-east/israels-delek-says-finalised-deal-sell-tamar-gas-stake-uaes-mubadala-2021-09-02/.
[xv] Israel, Jordan sign huge UAE-brokered deal to swap solar energy and water. 22 November 2021. // The Times of Israel. HTML: https://www.timesofisrael.com/israel-jordan-sign-uae-brokered-deal-to-swap-solar-energy-and-water/.
[xvi] FedEx Express Strengthens Trade Connectivity Between the UAE and Israel. 24 November 2020. // FedEx. HTML: https://newsroom.fedex.com/newsroom/fedex-express-strengthens-trade-connectivity-between-the-uae-and-israel/.
[xvii] All UAE residents can now travel to Israel; COVID-19 vaccination not mandatory. 16 March 2022. // Gulf News. HTML: https://gulfnews.com/business/tourism/all-uae-residents-can-now-travel-to-israel-covid-19-vaccination-not-mandatory-1.86483373.
[xviii] Berman Lazar, AFP. First commercial flight between Israel and Bahrain lands at Ben Gurion Airport. 30 September 2021. // The Times of Israel. HTML: https://www.timesofisrael.com/first-commercial-flight-between-israel-and-bahrain-lands-at-ben-gurion-airport/.
[xix] Siegal Tobias. Saudi Arabia officially approves Israeli flights over its airspace. 1 December 2020. // The Jerusalem Post. HTML: https://jpost.com/israel-news/uae-prohibits-israeli-flights-to-dubai-as-saudis-postpone-flying-approval-650708/.
[xx] בצון אביב. בדקנו: כמה זמן ייקחו הטיסות למזרח? 19October 2020. // Mako. HTML: https://www.mako.co.il/travel-israel/magazine/Article-abb40b99c104571026.htm.
[xxi] UAE approves visa exemption agreement with Israel, Foreign Ministry says. 13 January 2021. // The Times of Israel. HTML: https://www.timesofisrael.com/uae-approves-visa-exemption-agreement-with-israel-foreign-ministry-says/.
[xxii] Corder Josh. 250,000 Israel tourists visit UAE since Abraham Accords. 17 October 2021. // Hotelier Middle East. HTML: https://www.hoteliermiddleeast.com/news/250000-israel-tourists-visit-uae-since-abraham-accords.
[xxiii] Benny John. Israel sets sights on 100,000 visitors from the UAE as travel sector opens up in full. 17 March 2022. // Gulf News. HTML: https://gulfnews.com/business/tourism/israel-sets-sights-on-100000-visitors-from-the-uae-as-travel-sector-opens-up-in-full-1.1647489468895.
[xxiv] Koplow Michael J. The Unique Israel-Bahrain Dynamic. 17 February 2022. // Israel Policy Forum. HTML: https://israelpolicyforum.org/2022/02/17/the-unique-israel-bahrain-dynamic/.
[xxv] UAE, Israel to develop unmanned military, commercial vessels. 18 November 2021. // Al-Jazeera. HTML: https://www.aljazeera.com/news/2021/11/18/uae-israel-to-develop-unmanned-military-commercial-vessels.
[xxvi] מפגש זום בין שרי החוץ של ארה”ב, הודו, איחוד האמירויות וישראל. 19 אוקטובר 2021. // משרד החוץ. HTML: https://www.gov.il/he/departments/news/zoom_conversation_between_fm_s_us_india_uae_israel.
