15 Nov 2020

The Abraham Accords: Politico-Economic Drivers and Opportunities

Dr. Daniel Schatz

Introduction

On September 15, 2020, United States President Donald Trump hosted the Minister of Foreign Affairs and International Cooperation of the United Arab Emirates (UAE) H.H. Sheikh Abdullah bin Zayed Al Nahyan, Bahrain’s Foreign Minister Dr. Abdullatif bin Rashid Al Zayani, and Israel’s Prime Minister Benjamin Netanyahu on the White House lawn – scene of the signing of the historic 1993 Israeli-Palestinian Oslo Peace Accords twenty-seven years earlier. The gathering announced the signing of the Abraham Accords – named after the common patriarch of the three monotheistic Abrahamic religions – establishing peace, diplomatic and trade relations, and a normalization of bilateral ties between the State of Israel, the UAE, and the Kingdom of Bahrain.

The accords, founded upon the shared strategic, economic and trade interests between the parties, constitute the first major breakthrough for regional peace in more than a quarter century since the Oslo accords, which Israel’s late President Shimon Peres trumpeted as the coming of a “new Middle East” that would bring reconciliation and prosperity to the region. The UAE and Bahrain, under the guidance of H.H. Crown Prince Mohammed bin Zayed bin Sultan Al Nahyan and H.M. King Hamad bin Isa bin Salman Al Khalifa, have now become the third and fourth member states of the 22-nation Arab League – after Egypt (1979) and Jordan (1994) – to establish full diplomatic and trade relations with the Jewish state.

With the Republic of Sudan becoming the fifth Arab state to announce a normalization of relations with Israel on October 23, a mere 72 days after the signing of the Abraham Accords, and more Arab nations expected to sign on, the unprecedented road to peace could unlock business potential and create new opportunities for trade and investment not only for the Arab Gulf states, but across the Middle East and North Africa (MENA) region.

The Abraham Accords: Strategic and Political Drivers of Peace

On their face at odds with the long arc of Arab-Israeli relations, the accords reflect and extend incremental progress in links between Israel and Arab Gulf states over the last two decades. A number of long and shorter-term macro and micro-level developments contributed to this normalization process. They include joint security concerns and geopolitical interests as well as common understanding that regional peace, tolerance, and mutual trade serve as keys to economic prosperity.

In a longer perspective, Iraq’s 1990 invasion of Kuwait constituted a turning point in the national security perceptions of the Arab States of the Gulf region. Governments were compelled to reconsider their views of the regional strategic landscape, as conceptions of security and stability were shattered in the aftermath of the 1990-1991 Gulf War. Palestine Liberation Organization (PLO) Chairman Yasser Arafat’s support for Saddam Hussein’s invasion of Kuwait angered member states of the Gulf Cooperation Council (GCC) – also known as the Cooperation Council for the Arab States of the Gulf – and prompted a sense of betrayal that has lasted to this day.[1]

Meanwhile, Israel, Egypt, Syria, and Lebanon sent delegations to the 1991 Madrid Conference on Arab-Israeli Peace, also attended by a joint Jordanian-Palestinian delegation, and held historically unprecedented direct negotiations.[2] The Oslo Accords (1993), which established the self-governing Palestinian National Authority (PNA) in parts of the West Bank and the Gaza Strip (1994), followed the Madrid talks.

That same year, the Sultanate of Oman hosted the first visit to the Gulf region by an Israeli leader, Prime Minister Yitzhak Rabin. In 1996, the Sultanate and the State of Qatar established trade relations with Israel, the first countries of the six-nation GCC to do so. Rabin’s successor, Shimon Peres, visited Muscat in 1996, meeting with Sultan Qaboos bin Said to discuss the formal launch of trade relations.[3]

The Al-Aqsa Intifada and subsequent Israeli-Palestinian clashes in 2000 provoked domestic and regional pressure on Qatar and Oman to backtrack on these ties.[4] In the wake of “Operation Cast Lead,” Israel’s 2008-2009 military operation directed against the Hamas government in Gaza, Oman closed the Israeli trade office while Doha permanently severed trade relations with the Jewish State.[5] Given Qatar’s more recent alignment with Turkey, Iran and Hamas, formal relations between Qatar and Israel seem unlikely to resume anytime soon.[6]

Today’s Middle Eastern politico-economic landscape has profoundly changed. Egypt’s stagnating economic development has tempered its aspirations to lead the Arab world. Iraq has experienced inter- and intrastate conflicts with Iran, the United States, and the Islamic State of Iraq and Syria (ISIS) going back to the 1980s. The political, economic, military and strategic decline of these actors has presented an opportunity for the Arab Gulf States to fill the consequent regional power vacuum.[7]

Equally important, in every GCC member state, excepting Oman, between 1995 and 2006, younger leaders willing to set in motion political reforms and economic liberalization programs succeeded rulers in power since the 1970s and 1980s. The Arab Peace Initiative launched by the Kingdom of Saudi Arabia’s Crown Prince Abdullah bin Abdulaziz Al Saud at the Beirut Arab League Summit in 2002 – re-endorsed at the 2007 and 2017 summits – signaled a breakthrough in Arab willingness to formally and collectively recognize Israel’s existence once an independent Palestinian state is established.[8]

More recently, the major realignment of international relations in the footsteps of the “Arab Spring” of the early 2010s reframed the major political fault lines of the MENA region.[9] The 2017 diplomatic rift that isolated Qatar from its GCC partners, which largely stemmed from Qatar’s support of Muslim Brotherhood and other extremist groups, has impacted the Gulf region’s broader foreign relations, including those with Israel.

The complaints against Qatar from Saudi Arabia, the UAE, and Bahrain – centered around Doha’s Al-Jazeera network and foreign policy orientation vis-à-vis Turkey and Iran – reflect the “monarchical unity” goal of the GCC’s founding charter (1981). A rift between opponents of normalization (Qatar, Iran and Turkey) and states supporting it (UAE, Bahrain) has contributed to a growing perception of Israel as a strategic ally in the broader region. Turkey’s profile as a key protector of Palestinians under President Recep Tayyip Erdoğan, exemplified by his threat to close his country’s embassy in Abu Dhabi following the Abraham Accords, has added to the forces driving Israel and Arab Gulf States closer.[10]

To capitalize on these developments, Israel’s Foreign Ministry launched an Arabic-language @IsraelintheGulf Twitter channel as part of its regional Public Diplomacy efforts (the account went silent in 2014 but was re-launched as a “virtual embassy” to the Gulf countries in 2019).[11] In 2015, Israel established a diplomatic-level mission to the International Renewable Energy Agency (IRENA) headquartered in Abu Dhabi, its first openly established representative office to the international organization located in – although not accredited to – the UAE.[12]

Efforts to consolidate these unofficial ties gained traction when U.S. President Trump asked his son-in-law and senior adviser, Jared Kushner, to spearhead Middle East policy. In October 2018, Prime Minister Netanyahu visited Oman for talks with Sultan Qaboos as the first Israeli leader to formally visit the Sultanate in 22 years.[13] A year later, Israel announced it had accepted Dubai’s invitation to be one of 192 countries operating pavilions at the World Expo now scheduled to open in 2021.[14]

These winds of change were already publicly manifested in April 2018, when Crown Prince Mohammad bin Salman bin Abdulaziz Al Saud had stated in an interview with The Atlantic magazine that Israelis have the right to their own land, and that the Kingdom of Saudi Arabia shares interests with the Jewish State. In October 2019, Israel’s Foreign Minister at the time Israel Katz announced that the Trump administration and Israel had been in discussions about a “non-aggression” initiative with unnamed Arab Gulf States.[15] At about the same time, Israeli cabinet ministers visited the UAE while Katz met with his Bahraini counterpart in Washington. At a subsequent US-organized Warsaw summit to discuss Iran and other Middle East issues in February 2019, Netanyahu met again with senior Arab officials, posing for photos with Foreign Ministers from Oman and Yemen.[16]

On January 28, 2020, President Trump presented his peace plan for resolving the Middle East conflict.[17] The ambassadors of the UAE, Bahrain, and Oman attended the White House announcement. Six months earlier, Manama had already hosted the “Peace to Prosperity” economic conference, convened by Jared Kushner, to unveil the economic elements of Trump’s “deal of the century.”[18] Bahrain’s then Foreign Minister Khalid bin Ahmad Al Khalifa gave an interview to Israeli TV Channel 13, calling for open communication with the Jewish state. He concluded: “Israel is part of this heritage of this whole region, historically. So, the Jewish people have a place amongst us.”[19]

The Window of Opportunity: Suspended Annexation, the COVID-19 Pandemic, and Shared Strategic Objectives

While these developments facilitated the fruition of the Abraham Accords, a more immediate opportunity to break with the past came from Netanyahu’s agreement, in August 2020, to suspend plans to annex parts of the West Bank in return for normalization of relations with the UAE. The decision followed a Hebrew-language opinion edition published in the Israeli newspaper Yedioth Ahronoth by Yousef Al Otaiba, the Emirati ambassador in Washington, warning that annexation would undermine the quiet progress Israel had made with Gulf Arab States. “In the UAE and across much of the Arab world, we would like to believe Israel is an opportunity, not an enemy,” Al Otaiba wrote, adding, “We face too many common dangers and see the great potential of warmer ties.”[20]

At this juncture, the interrelated crises of the COVID-19 outbreak and oil price rout had placed severe economic pressure on Gulf Arab governments and the private sector across the MENA-region.[21] As a regional trade, tourism and transportation hub, the UAE’s economy is estimated to suffer a deeper contraction in 2020 than first estimated. GDP is estimated to shrink 5.2 percent, compared with a previous forecast for a decline of 3.6 percent, according to the country’s Central Bank. Abu Dhabi and Dubai, the two economically dominant Emirates, have to cope at least temporarily with falling oil and housing prices, a depressed tourism industry, and an interruption in the supply for foreign labor.[22]

These extraordinary and acute shocks to Gulf economies and the need to support new flows of trade to thrive in the post-coronavirus world, kept the window of opportunity for Israeli-Emirati-Bahraini détente open while encouraging Arab Gulf States to reach out to Israel for information and assistance in the fight against the virus.[23] As part of these efforts, the first commercial flight from the UAE landed in Israel, in May 2020, with emergency aid to help Palestinians battle the pandemic.[24]

A further factor contributing to the development of relations between the parties is that they share a set of converging strategic objectives. From an Israeli perspective, the Sunni Arab Gulf States enjoy significant financial resources and geographical proximity to its archenemy, the Shiite Islamic Republic of Iran, which the country views as the key threat to its existence. In this context, the Abraham Accords constitute a major step toward Israel’s reinforcement of its profile in the Middle East Region.

Given regional political upheavals and current intra-Palestinian divisions, the Israeli-Palestinian conflict has become less of a priority for most Arab states. Their preoccupation is with threats from Iran and the Muslim Brotherhood, and they see Israel as an ally in these efforts. In this context, the Palestinians have lost their biggest ace in the hole: their longstanding regional power has been the ability to obstruct normalization before a final resolution of their own conflict with Israel.[25] At the same time, the Abraham Accords provide Gulf Arab States with political leverage against Israel. In all likelihood, Israel will be pressured to make further progress on the Palestinian issue before additional Arab states move towards normalization.[26]

More importantly, since the late twentieth century, Iran’s growing regional influence in Lebanon, Syria, Iraq, and more recently in Yemen has fueled GCC States’ and Israel’s suspicion of the Islamic Republic’s intentions and capabilities.[27] The Arab Gulf States and Israel have felt under immediate threat ever since the 2015 Joint Comprehensive Plan of Action (JCPOA) between the so-called P5+1 (China, France, Russia, the United Kingdom, the United States and Germany) and Iran.

The Sunni opposition’s defeat in the Syrian Civil War, the ongoing Yemeni Civil War and an increasingly assertive and regionally influential Iran – located just 35 miles across from the UAE and the Strait of Hormuz – combined with the Trump administration’s lower profile and withdrawal of military presence in the Middle East, has left many traditional U.S. regional allies nervous.

The UAE, Bahrain and Israel have all showed a determination to halt the expansion of Iranian influence, manifesting itself as a “Shiite crescent” from Lebanon to Saudi Arabia, that King Abdullah II bin Al Hussein warned against over a decade ago. The normalization of bilateral ties with Israel – which holds the military power and political will to limit Iran’s global and regional influence – has become acceptable in view of these geopolitical realities.[28]

The Abraham Accords: Trade and Economic Prospects

The Abraham Accords hold the potential of benefiting regional trade and investment relations in a range of business sectors, from aviation and finance to health and tourism[29]. They pave the way for establishing direct flights, opening telecommunications links, establishing joint ventures, and bringing into the open commerce that has long been underground[30].

As part of the accords, the UAE will sign a number of trade and economic agreements, including double taxation and a free trade agreement with Israel. Emirati Minister of Economy Abdulla bin Touq Al Mari has termed these treaties a “dividend of peace” that will strengthen newly forged ties between the region’s two most innovative economies.[31] While the new trade and capital flows will immediately benefit Israel, the UAE, and Bahrain, they also stand to have a significant spillover effect on the entire MENA region and broader global economy.[32]

 The Development of Israel-Gulf Trade Relations

 Trade relations between Israel and the Arab Gulf states have slowly developed during the last 15 years. Government officials in Israel estimate that over 500 Israeli companies operate in the UAE at present and a more limited number in Bahrain.[33] Among the most profitable of these partnerships is that of Dubai’s state-owned DP World and Haifa-based Zim Integrated Shipping Services, which has made a series of joint investments across Asia, Europe, and South America.[34]

Before the formalization of trade relations, business was conducted via subsidiaries in third countries. Direct calls required overseas numbers while businessmen used foreign passports for commercial travel.[35] With trade largely routed through intermediaries, reliable figures on existing trade levels are not readily available. The Tony Blair Institute for Global Change, a United Kingdom nonprofit organization active in government advisory work, estimated in a 2008 report that Israel’s total trade with Gulf states amounted to about $1 billion.[36]

These figures indicate that the accords hold the potential to spawn more opportunities than what has been termed a “cold peace” between Israel, Egypt and Jordan. These treaties produced limited economic dividends; political normalization never translated into economic, cultural, or people-to-people normalization. The World Bank reports that Egyptian exports to Israel measured about half a billion dollars in 2018, with imports under $115 million. Trade with Jordan remains even more limited with less than $80 million in either direction.[37]

In contrast, one of the main reasons for the normalization between Israel, the UAE and Bahrain – which does not involve any territorial disputes or major grievances to be settled – is greater economic and technological cooperation. The Israeli Finance Ministry’s deputy chief economist, Lev Drucker, sees a potential for more substantial trade levels between the countries, starting at $2 billion and building up to $6.5 billion once cooperation matures. Moody’s Investors Service (August 2020), citing Israeli Ministry of Economy and Industry estimates, offers more conservative projections that normalization could value Israeli exports to the UAE at $300-$500 million a year, constituting 0.4 per cent of its total exports; UAE investments in Israel could reach $350 million a year, about 1.9 per cent of inbound foreign direct investment.[38]

A combination of factors offers the potential to boost trade and economic cooperation:

  • While Israel – with a 2019 gross domestic product (GDP) of $395 billion – is poor in natural resources, it is rich in high-tech and biotech, maintaining the top spot for research and development intensity in the Bloomberg 2020 Global Innovation Index for the third consecutive year.[39] Israel is ranked as having more high-tech start-ups and a larger venture capital industry per capita than any other country in the world.[40] The country’s creative, skilled, and multicultural workforce ranked first in the world for innovative capacity and for entrepreneurship in the World Economic Forum Global Competitiveness Report (2018)[41].

 

  • Similarly, the Emirates – the second largest economy in the Middle East after Saudi Arabia – is open to international trade; its exports account for almost half of its GDP of $421 billion (2019). The same applies for Bahrain with a GDP of $38.5 billion (2019).[42] The prospect of combining the financial capital of the Gulf region with Israel’s cybertechnology, agriculture technology, artificial intelligence (AI) and health care technology, holds the potential to make the region more prosperous.

 

  • While the Israeli and Emirati populations are roughly the same size, the UAE’s economic and population growth has increased demand for new technologies ranging from water and clean energy to telecommunications and defense. These are markets in which Israel has internationally recognized advantages, which hold potential for Emirati imports and Israeli exports, and an opportunity to improve Israel’s negative trade balance[43].

 

  • As the global price of oil plummets and reserves of the resource dwindle, the UAE and Bahrain are looking to diversify their economic base. The Emirates, as part of its Vision 2021, has started this process at the federal level by moving away from its historic dependence on revenues from petroleum and natural gas, developing such sectors as tourism, air transport, financial services, manufacturing, and alternative energy.[44] A construction boom, an expanding manufacturing base, and a thriving services sector have followed. International trade has grown by leaps and bounds, with clear economic potential for Israeli investments and regional trade in the Abraham Accords era.

 

  • These factors are reinforced by a substantial political and commercial will promote trade and build on existing trade relationships. As a case in point, CofaceBdi, the largest business information group in Israel, polled 230 heads of Israeli companies; 82% believe the accords will have a positive effect on their businesses. Two-thirds of respondents from the high-tech sector were actively looking into business opportunities in the UAE, while 57% in the trade sector said they intended to fly to the UAE within a year to explore opportunities[45].

 

  • Both the UAE and Bahrain pride themselves as countries of tolerance. In 2016, the UAE established a ministry for promoting tolerance. Two years later, it hosted a summit between Pope Francis and Sheikh Ahmed El-Tayeb, Grand Imam of Al-Azhar University and a leading religious authority of the Sunni Muslim world, who jointly drew up the Document on Human Fraternity aiming at promoting global interfaith coexistence.[46] One Emirate, Dubai, already has a well-established Jewish community; another, Abu Dhabi, is building a synagogue – to be completed by 2022 – as part of the part of the multifaith Abrahamic Family House complex also hosting a church and mosque[47].

 

  • Bahrain is home to the only indigenous Jewish community in the Gulf, dating back about 140 years to the late 1800s.[48] Already, in 2017, a Bahraini delegation visited Israel to promote religious tolerance, and in 2019 Tel Aviv’s chief rabbi visited Bahrain to take part in an interfaith event. These initiatives, demographics and institutions suggest openness to Israeli Jews’ living and working in the region.

 

Future Business Potential

Which business areas hold the potential to further trade between the parties? The Abraham Accords list 16 areas of Israeli-UAE collaboration, including environment, agriculture, and water and food security, as well as more strictly commercial areas such as civil aviation, tourism, energy, science, and technology.[49] Israel and Bahrain signed an additional eight memoranda of understanding (MOU) on October 18, 2020, regarding the promotion of cooperation in economy and trade, civil aviation, finance, telecommunications, information technologies, postal services, agriculture, and foreign affairs.[50] Some immediate developments suggest a number of future business possibilities in these fields:

 

  • Civil Aviation: On August 31, 2020, Israel’s flagship carrier El Al operated the first-ever direct commercial flight between Tel Aviv and Abu Dhabi, followed by a first flight from Israel to Manama on October 18. In another first, Saudi Arabia opened its airspace to the flights – and reportedly agreed to allow all such flights from Israel. The UAE’s Etihad Airways launched a Hebrew-language website for customers interested in the direct Tel Aviv-Abu Dhabi route[51].

 

  • The impact of this breakthrough cannot be overstated. It will allow national carriers in all three countries to shorten distances to Europe and to central, southern, and eastern Asia. One intriguing possibility is the revival of ancient trade routes that once connected the Middle East to the rest of the world. The S&P ratings agency highlights that the launch of direct commercial flights can significantly increase cooperation between the countries in the areas of tourism, security, telecommunications, technology, health, education, financial services and agriculture[52].

 

  • Tourism: Bahrain’s tourism sector has emerged as one of the key contributors to its diversifying economy.[53] The UAE has likewise been steadily developing tourism, projecting revenue of $85 billion by 2027. As direct flights begin, Israel and the UAE have agreed to allow their citizens reciprocal visa-free travel.[54] It is noteworthy that this step will multiply the investment opportunities between the two states.

 

  • In 2019, 4.3 million Israelis, nearly half of the country’s 9.1 million citizens, traveled abroad, according to the country’s Central Bureau of Statistics (CBS).[55] Twenty-eight passenger flights and 10 cargo flights scheduled weekly between Israel and the UAE, along with 14 weekly direct flights between Tel Aviv and Manama,[56] could provide welcome diversified revenue to the UAE and Bahrain.

 

  • The Gulf countries may in turn supply Israel with tourists of their own, traveling for both commercial and religious purposes, including pilgrimages to the Al-Aqsa Mosque, the third holiest place in Islam.[57] Bal Krishen, chairman of Century Financial, one of the UAE’s leading financial consultancy firms, forecasts that in the aftermath of the Abraham Accords up to 500,000 Israelis will travel to the Emirates for tourism and leisure, while the number of UAE tourists expected to visit the Jewish state could be between 500,000 to 750,000.[58] Specific projections aside, existing and developing factors strongly suggest the potential for this sector to serve as a pillar for bilateral trade, commerce, and people-to people relations.

 

  • Science, Technology and Innovation: Israel ranks as of the world’s most innovative countries with more per capita start-ups, patents, technology companies, and scientific advancements than any other. Despite its small population relative to other industrialized nations, the country is ranked second in the world in research and development expenditure per capita, and boasts more than 9,000 active startup technological companies; its central high-technology hub Silicon Wadi is considered second in importance only to its California counterpart.[59] This start-up landscape encompasses key areas for Gulf investors ranging from the medical and agriculture sectors to renewables, biotech, and AI.

 

  • Likewise, Dubai focused on innovation-led growth, and on broader UAE and Bahraini efforts to develop a knowledge economy through digital transformation and the promotion of entrepreneurship. The Abu Dhabi Investment Office plans to open its first international outpost in Israel to promote innovation-focused cooperation.[60] Along with the U.S., Israel and the UAE have launched a fund that aims to raise $3 billion in private investment for development projects throughout the Middle East[61].

 

  • The new agreements on technical collaboration and cooperation have already been put into gear by a number of companies and research institutions Abu Dhabi-based Group 42, an artificial intelligence and cloud computing company, was one of the first companies in the UAE to announce plans to establish a wholly owned subsidiary in Israel; the Emirati company had earlier formed partnerships with Israeli firms to develop technological solutions for combating the coronavirus. Israel’s Mobileye signed a partnership with UAE-based Al Habtoor Group to deploy a fleet of self-driving robo-taxis in Dubai by the end of 2022.[62] The UAE’s Mohamed bin Zayed University of AI (MBZUAI) and Israel’s Weizmann Institute of Science signed an agreement to advance the development and use of AI as a tool for progress. When the dust settles from the COVID-19 pandemic, and oil prices stabilize, the region’s digital economy is likely to emerge as the biggest winner.

 

  • Energy: Cooperative linkages are not only forming at the level of advanced technologies but also intersect with established industries in the Gulf, including the energy sector. Israel, with limited oil and underexploited – some only recently discovered – natural gas resources, has developed a number of startups in the energy field, including a strong solar sector. Meanwhile, the UAE and Bahrain are applying their energy expertise to renewable sources as they seek to diversify from oil. The three countries could benefit from intensified cooperation in the energy sector, including renewable energy and energy efficiency, as they jointly and separately seek ways to penetrate the market throughout the MENA region and beyond[63].

 

  • The potential for energy commerce development continues to include the oil and natural gas sector, vital for both the Emirati and Bahraini economies. Today, Israel gets 40 percent of its oil via the Baku-Tbilisi-Ceyhan pipeline that connects Azerbaijan, Georgia, and Turkey. Other suppliers include Mexico, Norway, Angola, Egypt, the Kurdish self-governing areas of Iraq, Russia, and Kazakhstan.[64] The UAE and Bahrain could provide a closer, cheaper source.

 

  • In one of the most significant collaborations to date, Israel and the UAE have entered a preliminary agreement under which Emirati crude oil can be shipped to European markets via an Israeli pipeline from the Red Sea to the Mediterranean, built during the Israeli-Iranian alliance that disappeared with the establishment of the Islamic Republic in 1979.[65] The pipeline will offer oil producers and refiners a short, cost-efficient conduit for oil from the Arabian Gulf to the West, while providing access for consumers in the Far East to oil produced in the Mediterranean and Black Sea regions[66].

 

  • Water, Environment, Agriculture: Water scarcity is a challenge in both Arab Gulf countries and in Israel; the parties have pledged to collaborate on projects addressing water security[67]. This is one of several areas where Arab countries and Israel have been quietly working together since the early 1990s.[68] Similar ecological characteristics of Israel and the Gulf region—desert terrain and rising temperatures—suggest both sides could also benefit from further collaboration on climate change issues, water desalination, and advanced agriculture.

 

  • Food Security: An interrelated potential area of cooperation relates to food security. Gulf States currently import more than 90 percent of their food. This concern was intensified during the COVID-19 pandemic, which caused transportation stoppages and disrupted supply for several months. The Abraham Accords enable Israeli companies that lead in fields ranging from precision agriculture and irrigation to seed treatment, desalination, and solar energy to enter the Emirati and Bahraini markets and partner with local ag-tech startups[69].

 

  • Maritime Arrangements: The maritime industry has moved quickly to benefit from the Abraham Accords with Dubai’s flagship commercial entities driving formal ties with Israeli counterparts. Dubai Ports World, one of the world’s largest port operators, signed an agreement with Israel’s DoverTower to buy a stake in the privatization of Haifa Port, Israel’s largest by cargo tonnage. Maersk, the world’s number one container line, announced it will start transporting ocean cargo between the UAE and Israel.[70] Intensified cooperation in maritime shipping holds the potential to boost inter-port competition, lower costs, and establish an advanced international trade and logistics infrastructure.

 

  • Diamond Trade: The Dubai and Israel Diamond Exchanges have entered agreements aimed at building closer ties. Although neither country mines diamonds, both are world leaders in sales; the Israel Exchange is the largest in the world while Dubai hosts the largest trading floor. Dubai – which aims to become the world’s largest diamond dealer by 2023 – traded some $23 billion last year, and Israel around $12 billion, amounting to 23% of its total exports.[71] For Israel, the deal offers closer links to India and connects it to the Arab world, where most countries still do not have formal ties with the Jewish State. For the UAE, the agreement holds potential to consolidate Dubai’s hub status in global precious commodities trade[72].

 

While not exhaustive, the examples above illustrate the trade potential and future business possibilities made possible by the Abraham Accords. The relative parity between the Emirati dirham – currently trading at $3.67 42 (October 30, 2020, with the Bahraini dinar at $2.65) – and the Israeli new shekel, trading at $3, should further facilitate the development of bilateral trade.

Conclusion

 Historical maps of the Middle East used to portray the region as the center of the world. For decades, this ancient part of the Silk Road – facilitating trade, economic, cultural, political, and religious links between the East and West – was cut off due to political disagreements, inter- and intra-state conflicts and a culture of distrust that threatened international peace and security.

It will take time before we can fully assess all opportunities and challenges presented by the Abraham Accords. However, most can agree that, just as the fall of the Berlin Wall of 1989 constituted a pivotal event in world history – marking the fall of the Iron Curtain and a change of international relations – the accords, reflecting the tectonic political, economic and strategic shifts in the region of the last decade, hold the potential to mark the dawn of a new era in the Middle East.

As evidenced by this report, intensified trade between Israel, the UAE and Bahrain can help provide the glue to ensure the three-way accords – with their potential for previously unimaginable alliances and opportunities for both Arabs and Israelis – are a success. This argument is reinforced by a recent World Economic Forum report (2020) suggesting that greater economic integration, reduced regulatory barriers, and freer movement of people and capital could result in a doubling of GDP in the Middle East within a decade – that projection did not account for the inclusion of Israel in such movements.[73]

As the Middle East peace train moves forward, the most pressing question today is not whether, but when another country extends and receives a hand of peace. Though the Israeli-Palestinian conflict remains unresolved, the herald of a warm peace among Israeli, Emirati, and Bahraini citizens can bring hope to all the children of Abraham. The Abraham Accords hold the potential to serve as the foundation for a comprehensive peace process across the entire region by demonstrating the tangible, real-world benefits of people-to-people ties, trade, commerce, and mutual cooperation.


References

[1] Uzi Rabi, “Qatar’s Relations with Israel: Challenging Arab and Gulf Norms,” Middle East Journal 63, no. 3 (2009).

[2] Dennis Ross, The Missing Peace: The Inside Story of the Fight for Middle East Peace (New York: Farrar, Straus and Giroux 2005).

[3] Rabi, “Qatar’s Relations with Israel.

[4] Kristian Coates Ulrichsen, “Israel and the Arab Gulf States: Drivers and Directions of Change (Center for the Middle East, Baker Institute for Public Policy, Rice University, Houston, 2016), accessed October 16, 2020, https://www.bakerinstitute.org/media/files/research_document/13eaaa71/CME-pub-GCCIsrael-090716.pdf

[5]  Ulrichsen, “Israel and the Arab Gulf States.”

[6] Despite the lack of formal relations, Israel and Qatar have ongoing bilateral cooperation relating to the transfer of aid to the Gaza Strip, driven by the joint objective of transferring humanitarian aid to the Palestinians. Israel has an interest in seeing Qatari aid – which amounts to more than a billion dollars since 2012 – continue given its view that improvements in the humanitarian situation might help delay a future military confrontation with Hamas. From Qatar’s perspective, the transfer of economic aid strengthens its regional strategic position while contributing to enhance its ties to the U.S. administration. Qatar gains further bargaining chips in the intra-GCC dispute and an amount of leverage vis-à-vis Israel. See Yoel Guzansky, “How GCC Conflict Impacts the Gulf Response to Israeli Annexation”, Fikra Forum, The Washington Institute, Washington, DC, July 1, 2020, accessed October 22, 2020, https://www.washingtoninstitute.org/fikraforum/view/GCC-Conflict-Gulf-Israel-Annexation-Middle-East and Giorgio Cafiero, “Would an Israeli embassy ever open in Doha?” Doha News, August 17, 2020, accessed October 22, 2020, https://www.dohanews.co/would-an-israeli-embassy-ever-open-in-doha.

[7] Jonathan H. Ferziger and Gawdat Bahgat, “Israel’s Growing Ties with the Gulf Arab States” (Scowcroft Middle East Security Initiative, The Atlantic Council, Washington, DC, July 2020), accessed October 22, 2020, https://www.atlanticcouncil.org/wp-content/uploads/2020/07/Israel%E2%80%99s-Growing-Ties-with-the-Gulf-Arab-States.pdf.

[8] Ulrichsen, “Israel and the Arab Gulf States.”

[9] Paul Danahar, The New Middle East: The World After the Arab Spring. (London: Bloomsbury, 2013).

[10] Ferziger and Bahgat, “Israel’s Growing Ties.” Ofir Winter and Yoel Guzansky, “Islam in the Service of Peace: Religious Aspects of the Abraham Accord” (The Institute for National Security Studies, Tel Aviv University, September 6, 2020), accessed October 30, 2020, https://www.inss.org.il/publication/israel-uae-deal-and-islam.

[11] Barak Ravid, “Israel Opens a ‘Virtual Embassy’ to Gulf States” Haaretz, July 21, 2013, accessed October 22, 2020, https://www.haaretz.com/premium-israel-opens-gulf-virtual-embassy-1.5297843.

[12] An additional Israeli political presence in the Gulf has existed in Oman since 1996 through the Middle East Desalination Research Center. See “Israel to open representative office in Abu Dhabi, first in UAE,” Reuters, November 27, 2015, accessed October 18, 2020, https://www.reuters.com/article/us-israel-emirates-idUSKBN0TG0PG20151127.

[13] Barak Ravid, “Scoop: What really happened on Netanyahu’s landmark visit to Oman” Axios, February 25, 2020, accessed October 22, 2020, https://www.axios.com/sarah-netanyahu-oman-visit-middle-east-peace-edd475ba-af44-42b2-8d05-e4e26bab7918.html.

[14] “Israel to take part in Dubai Expo 2020, Khaleej Times, April 27, 2019, accessed October 22, 2020, https://www.khaleejtimes.com/region/mena/israel-responds-to-dubai-expo-2020-invitation.

[15] Daniel Schatz, “Israel’s Real Relationship with the Gulf States,” The National Interest, June 10, 2020, accessed October 13, 2020, https://nationalinterest.org/feature/israel%E2%80%99s-real-relationship-gulf-states-162521.

[16] Ferziger and Bahgat, “Israel’s Growing Ties.”

[17] The White House, “Peace to Prosperity: A Vision to Improve the Lives of the Palestinian and Israeli People,” accessed October 25, 2020, https://www.whitehouse.gov/peacetoprosperity.

[18] Ibid.

[19] Associated Press, “The Latest: Bahrain FM gives interview to Israeli TV channel” June 26, 2019, accessed October 25, 2020, https://apnews.com/article/37ce204559fe434da7124d74db9310a7.

[20] Yousef Al Otaiba, “Annexation will be a serious setback for better relations with the Arab world,” Yedioth Ahronot, June 12, 2020, accessed October 26, 2020, https://www.ynetnews.com/article/H1Gu1ceTL.

[21] The UK-based Oxford Economics advisory firm estimates the UAE could lose 900,000 jobs among its population of under 10 million resulting from the socio-economic effects of the COVID-19 pandemic. See Sameer Hashmi, “Coronavirus threatening expat exodus from the UAE,” BBC News, October 9, 2020, accessed October 22, 2020, https://www.bbc.com/news/world-middle-east-54418336.

[21] Ferziger and Bahgat, “Israel’s Growing Ties.

[22] Arabian Business, “Coronavirus set to deliver 5.2% GDP blow to UAE economy in 2020”, 23 September, 2020, accessed November 1, 2020, https://www.arabianbusiness.com/banking-finance/452213-coronavirus-set-to-deliver-52-gdp-blow-to-uae-economy-in; Reem Alshamsi, “A Blessing in Disguise: UAE’s Possible Scenarios for a Post-COVID-19 World”, E-International Relations, August 19, 2020, accessed November 1, 2020, https://www.e-ir.info/pdf/87023.

[22] Associated Press, “The Latest: Bahrain FM gives interview to Israeli TV channel” June 26, 2019, accessed October 25, 2020, https://apnews.com/article/37ce204559fe434da7124d74db9310a7.

[23] Schatz, “Israel’s Real Relationship.

[24] Michael C. Bender and Dion Nissenbaum, “Israel-UAE Pact Sealed After Months of Furtive Talks Among Envoys Trusted by Their Leaders”, Wall Street Journal, August 13, 2020, accessed 26 October, 2020, https://www.wsj.com/articles/israel-u-a-e-pact-sealed-after-months-of-furtive-talks-among-envoys-trusted-by-their-leaders-11597359904 ().

[25] Ferziger and Bahgat, “Israel’s Growing Ties.”

[26] Elie Podeh, “How the UAE and Saudi Arabia Now Hold Israel Hostage,” Haaretz, August 26, 2020, accessed October 30, 2020, www.haaretz.com/middle-east-news/.premium-how-the-uae-and-saudi-arabia-now-hold-israel-hostage-1.9101401.

[27] Ferziger and Bahgat, “Israel’s Growing Ties.”

[28] Ibid.

[29] The accord lists 16 areas of collaboration between Israel and the UAE including: Finance and Investment; Civil Aviation; Trade; Healthcare; Science and Technology; Peaceful Uses of Outer Space; Tourism; Culture and Sport;  Energy; Environment;  Education; Maritime Arrangements; Telecommunications and Post; Agriculture and Food Security; Water and Legal Cooperation. See White House, “Treaty of Peace, Diplomatic Relations and Full Normalization Between the United Arab Emirates and the State of Israel,” foreign policy statements and releases, September 15, 2020, accessed October 26, 2020, https://www.whitehouse.gov/briefings-statements/abraham-accords-peace-agreement-treaty-of-peace-diplomatic-relations-and-full-normalization-between-the-united-arab-emirates-and-the-state-of-israel.

[30] Felicia Schwartz and Stephen Kalin, “Israel and UAE Get Down to Business,” Wall Street Journal, August 21, 2020, accessed October 26, 2020, https://www.wsj.com/articles/israel-and-u-a-e-get-down-to-business-11598035520.

[31] Sarmad Khan. “UAE-Israel trade and investment prospects ‘exciting’ for both nations, economy minister says,” The National, September 14, 2020, accessed October 14, 2020, https://www.thenational.ae/business/economy/uae-israel-trade-and-investment-prospects-exciting-for-both-nations-economy-minister-says-1.1077729

[32] Khan, “UAE-Israel trade and investment prospects.”

[33] Interview with Israeli government official, October 15, 2020. Also see “After 20 Years of Relations Under the Radar, Israeli Mission in Abu Dhabi Is Set for an Upgrade,” Haaretz, August 19,, 2020, accessed October 16, 2020, https://www.haaretz.com/israel-news/premium-amid-uae-deal-israeli-foreign-minister-talks-with-counterparts-in-arab-countries-1.9083573.

[34] Jim Krane, Dubai: The Story of the World’s Fastest City (New York: St Martin’s Press, 2009).

[35] Ibid.

[36] Tony Blair Institute, “Assessing Israel’s Trade With Its Arab Neighbours,” (Tony Blair Institute for Global Change, London, August 14, 2018), accessed October 25, 2020, https://institute.global/advisory/assessing-israels-trade-its-arab-neighbours.

[37] Schwartz and Kalin, “Israel and UAE.”

[38] David George, “UAE and Israel: A new era of economic possibilities,” Gulf News, September 16, 2020, accessed October 26, 2020, https://gulfnews.com/business/analysis/uae-and-israel-a-new-era-of-economic-possibilities-1.1600257518838.

[39] Israel placed first in R&D intensity – research and development expenditure as a percent of the country’s GDP –and second in researcher concentration – the percentage of R&D professionals among the general population. See Luke Tress, “Israel slips to sixth place in annual Bloomberg Innovation Index,” Times of Israel, January 21, 2020, accessed October 30, 2020, https://www.timesofisrael.com/israel-slips-to-sixth-place-in-annual-bloomberg-innovation-index.

[40] Jordan Yerman, “A Startup Nation: Why Israel Has Become the New Silicon Valley, APEX Experience Magazine, May 22, 2019, accessed October 30, 2020, https://apex.aero/articles/startup-nation-israel-become-silicon-valley.

[41] Soshana Solomon, “Israel gets top marks for innovation, entrepreneurship in WEF report,” Times of Israel, October 17, 2018, accessed October 30, 2020, https://www.timesofisrael.com/israel-gets-top-marks-for-entrepreneurship-innovation-in-wef-report.

[42] World Bank, Open Data, “United Arab Emirates GDP,” accessed October 30, 2020, https://data.worldbank.org/country/united-arab-emirates; “Israel GDP,” accessed October 30, 2020, https://data.worldbank.org/country/israel; “United Bahrain GDP,” accessed October 30, 2020, https://data.worldbank.org/country/bahrain.

[43] The UAE Strategy for the Fourth Industrial Revolution (4IR) was launched in September 2017, aiming to strengthen the country’s position as a global hub for advancing innovation and future technologies. See United Arab Emirates Government Portal, “Economy,” accessed October 18, 2020, https://u.ae/en/about-the-uae/economy.

[44] United Arab Emirates Portal, “Economy.”

[45] Ofer Petersburg, “Israeli CEOs eager to do business in the Emirates, survey shows,” Israel Hayom, October 21, 2020, accessed October 26, 2020, https://www.israelhayom.com/2020/10/21/israeli-ceos-eager-to-do-business-in-the-emirates-survey-shows.

[46] Winter and Guzansky, “Islam in the Service of Peace.”

[47] “Abu Dhabi: A synagogue, mosque and church, will be in one location,” Gulf News, September 21, 2019, accessed October 18, 2020, https://gulfnews.com/uae/government/abu-dhabi-a-synagoguemosque-and-church-will-be-in-one-location-1.1569067182292.

[48] “After Israel Deal, Bahrain’s Jews Seek to Revive Community with New Rabbi, Synagogue,” Al Arabiya, September 14, 2020, accessed October 18, 2020, https://english.alarabiya.net/en/features/2020/09/14/Close-to-extinction-Bahrain-s-Jews-say-Israel-deal-revives-their-community.

[49] United States Department of State, “The Abraham Accords Declaration,” accessed October 13, 2020, https://www.state.gov/the-abraham-accords.

[50] Abigail Klein Leichman, “Israel and Bahrain sign off on 8 cooperative agreements,” Israel21C, October 19, 2020, accessed October 30, 2020, https://www.israel21c.org/israel-and-bahrain-sign-off-on-8-cooperative-agreements.

[51] Agence France-Presse (AFP), “Saudi Arabia opens airspace for UAE-Israel flights,” September 2, 2020, accessed 26 October 2020, https://www.msn.com/en-us/news/world/saudi-arabia-opens-airspace-for-uae-israel-flights/ar-BB18Di43. Abigail Klein Leichman, “Why the UAE is looking to Israel to secure its food supplies,” Israel21C, October 19, 2020, accessed October 30, 2020, https://www.israel21c.org/why-the-uae-is-looking-to-israel-to-secure-its-food-supplies.

[52] Issac John, “UAE-Israel peace treaty could boost tourism and tech sectors,” Khaleej Times, September 22, 2020, accessed October 30, 2020, https://www.khaleejtimes.com/business/local/peace-accord-to-spur-tourism-tech-sectors.

[53] Nayla Barakat, “Bahrain’s tourism sector major contributor to GDP,” Bahrain News Agency, April 11, 2019, accessed October 30, 2020, https://www.bna.bh/en/ConstitutionalCourttoconsiderConstitutionalCase1/BahrainstourismsectormajorcontributortoGDP.aspx?cms=q8FmFJgiscL2fwIzON1%2BDuiOl7fawijxA4BC6QUSOt0%3D.

[54] Felicia Schwartz, “Israel, UAE to Allow Citizens Visa-Free Travel,” Wall Street Journal, October 20, 2020, accessed October 26, 2020, https://www.wsj.com/articles/israel-u-a-e-to-allow-citizens-visa-free-travel-11603207483.

[55] Navit Zomer, “Nearly Half of Israelis Traveled Abroad in 2019,” Ctech by Calcalist, June 1, 2020, accessed October 30, 2020, https://www.calcalistech.com/ctech/articles/0,7340,L-3777161,00.html.

[56] “Israel, Bahrain ink agreement for weekly direct flights,” Times of Israel, October 22, 2020, accessed October 26, 2020, https://www.timesofisrael.com/israel-bahrain-ink-agreement-for-weekly-direct-flights.

[57] Michael Humphries, “What can Israel and the UAE sell to each other?”, Times of Israel, September 8, 2020, accessed October 25, 2020, https://blogs.timesofisrael.com/what-can-israel-and-the-uae-sell-to-each-other/.

[58] Waheed Abbas, “Special: UAE-Israel travel could get a boost,” Khaleej Times, September 14, 2020, accessed October 30, 2020, https://www.khaleejtimes.com/business/local/UAE-Israel-travel-could-get-a-boost-.

[59] Nesreeen Bakheit and James Hand-Cukierman, “UAE-Israel deal’s reverberations extend to Asia ahead of signing,” Nikkei Asia, September 10, 2020, accessed October 25, 2020, https://asia.nikkei.com/Politics/International-relations/UAE-Israel-deal-s-reverberations-extend-to-Asia-ahead-of-signing.

[60] Muzaffar Rizvi, “UAE-Israel business ties in the fast lane,” Khaleej Times, September 17, 2020, accessed October 30, 2020, https://www.khaleejtimes.com/business/local/uae-israel-business-ties-in-the-fast-lane. “UAE, Israel universities ink agreement to boost AI collaboration,” Khaleej Times, September 15, 2020, accessed October 30, 2020, https://www.khaleejtimes.com/news/education/uae-israel-universities-ink-agreement-to-boost-ai-collaboration.

[61] Lahav Harkov, “Israel, UAE, US launch joint fund in Jerusalem during first state visit,” Jerusalem Post, October 20, 2020, accessed October 25, 2020, https://www.jpost.com/breaking-news/netanyahu-israel-uae-to-cooperate-in-the-battle-against-coronavirus-632813.

[62] Leichman, “Why the UAE is looking to Israel.”

[63] Karin Kloosterman, “A new energy future fueled by Emirati and Israeli peace,” Green Prophet, September 1, 2020, accessed October 25, 2020, https://www.greenprophet.com/2020/09/new-energy-future-uae-israel.

[64] Yossi Lempkowicz, “How the Armenian-Azerbaijani conflict could impact Israel’s regional strategic landscape,” European Jewish Press, October 15, 2020, accessed October 30, 2020, https://ejpress.org/how-the-armenian-azerbaijani-conflict-could-impact-israels-regional-strategic-landscape.

[65] Tsvetana Paraskova, “Israel And the UAE Sign Historic Oil Deal,” Oilprice.com, October 21, 2020, accessed October 25, 2020, https://oilprice.com/Energy/Crude-Oil/Israel-And-The-UAE-Sign-Historic-Oil-Deal.html.

[66] “Israeli firm signs deal to pipe UAE oil to Europe,” Times of Israel, October 21, 2020, accessed October 30, 2020, https://www.timesofisrael.com/israeli-firm-signs-deal-to-pipe-uae-oil-to-europe.

[67] Reuters, “UAE and Israel discuss cooperation on food and water security,”, Ynetnews, August 30, 2020, accessed October 25, 2020, https://www.ynetnews.com/article/H1JX3XFXv.

[68] United Arab Emirates, “Water Security Strategy 2036,” Government Portal, accessed October 25, 2020, https://u.ae/en/information-and-services/environment-and-energy/water-and-energy/water-.

[69] Leichman, “Why the UAE is looking to Israel.”

[70] Reuters, “Cargo from Dubai Arrives at Haifa Port, Cementing Israel-UAE Trade Route,” Haaretz, October 12, 2020, accessed October 25, 2020, https://www.haaretz.com/israel-news/business/cargo-from-dubai-arrives-at-haifa-port-cementing-israel-uae-trade-route-1.9228577.

[71] “In UAE-Israel deal, peace and profits go hand in hand,” Ynetnews, October 23, 2020, accessed October 25, 2020, https://www.ynetnews.com/business/article/HyifaI2wv; Humphries, “What can Israel and the UAE.”

[72] Alexander Cornwell, “UAE-Israel accord could bring new sparkle to Dubai diamond trade,” Reuters, October 7, 2020, accessed October 30, 2020, https://www.reuters.com/article/israel-gulf-emirates-diamonds-int-idUSKBN26S1WP.

[73] Alain Bejjani, “Here’s how to achieve growth in the Middle East and North Africa,” World Economic Forum, 16 January 16, 2020, accessed October 30, 2020, https://www.weforum.org/agenda/2020/01/how-to-achieve-growth-middle-east-north-africa/.

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