Israeli business seeks new chapter in UAE trade after historic deal


For nearly a decade, Israeli businessmen chasing lucrative deals in the oil-rich United Arab Emirates would board a private jet in Tel Aviv and head instead to neighbouring Egypt, one of only two Arab countries with relations with Israel.

A five minute layover — dubbed the “diplomatic stop” — at Sharm El Sheikh airport on the Red Sea would scrub the flight of its antecedents, and clear it to fly to the UAE.

In recent months, as the tempo of behind-the-scenes contacts sped up, the Emiratis gave permission to skip the stop altogether — planes simply flew a quick loop around the airport and then east across Saudi Arabia to Dubai and Abu Dhabi.

“The first time we did this, they brought out the champagne,” said one traveller who visited this year to hawk an array of cyber-surveillance software from at least six Israeli manufacturers.

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On Monday, even that pretence dropped: an El Al jet carried Israeli and US government officials, from National Security Council chairman Meir Ben-Shabbat to President Donald Trump’s son-in-law and Middle East Envoy, Jared Kushner, on the first commercial flight between the Jewish state and any Gulf country.

But despite the fanfare surrounding the recent historic opening of ties between the two nations, officials doubt the trip will result in any big announcements.

“Slowly, slowly,” said a senior Israeli diplomat. “They haven’t picked up the phone since 1971 [when the UAE was founded] — let’s learn to walk first, then we can hug and dance.”

A long history of suspicion combined with the fickle nature of Middle East alliances and practical difficulties could prove an initial barrier to the booming trade, tourism and security ties promised by Israel’s prime minister, Benjamin Netanyahu, said businessmen and officials.

A business park in Petah Tikva, east of Tel Aviv: Emirati interest centres on Israel’s desert agriculture and medical technology © Ronen Zvulun/Reuters

Benjamin Netanyahu speaks online to Jewish leaders in the UAE: the historic accord holds out the promise of thriving commerce, tourism and security ties © Amos Ben Gershom/GPO/dpa

“There’s lots to do, you’ve announced that you will begin a relationship but you have nothing on the ground, have no past practices, no consulate, so have to do a lot of these mundane issues that are important to every relationship,” said Anwar Gargash, UAE minister of state for foreign affairs. “We are looking at a lot of the groundwork and it’s quite a process.”

While Israeli weapons manufacturers, especially large players in the cyber surveillance industry, are thrilled at the prospect of a big market — both domestically, and as a foothold into the other Gulf states — opening up, Mr Gargash made clear that Emirati interests are more mundane: desert agriculture, in which Israel is a world leader, and medical technology.

Abu Dhabi, which boasts some of the region’s biggest sovereign investment vehicles, has ambitions to create agritech and technology hubs in the Emirate, areas where Israel is a world leader. One Israeli middleman said the most promising approach he had was to participate in a tender for a solar farm powering a desalination unit.

“Look, everyone and their mother has been selling to the Gulf for years, or at least trying to,” he said. “It’s a very, very difficult market — you spend years building a relationship, and then maybe a final sale takes place.”

Even before the thaw, wealthy Gulf investors had ploughed their riches — via Tel Aviv law firms — into the fast-growing Israeli tech start-up scene, focusing on security, media, technology and fintech.

There are no official figures, but trade between Israel and the Gulf states, including the UAE, had probably reached at least $1bn by about 2019, the Tony Blair Institute for Middle East Change estimated, mostly through subsidiaries based in Europe and elsewhere. That does not include the hundreds of millions of dollars in annual contracts that Israeli surveillance companies are said to have with Saudi Arabia, the UAE and Bahrain, a trio of allies most closely aligned with Israel in an anti-Iran alliance.

An air force crew at al-Dhafra air base in the UAE: Benjamin Netanyahu is embroiled in a row over whether he agreed to drop Israel’s objections to the UAE’s purchasing US-made F-35 fighter jets as part of the deal © Chris Thornberry/US Air Force/AP

Badia Farms in Dubai, using hydroponic technology to grow fruit and vegetables: Israel is a world leader in sustainable desert agriculture, promising gains for the UAE’s nascent high-tech food production sector © Karim Sahib/AFP/Getty

Gulf investors are seeking to form joint ventures with Israeli firms in these sectors, said Gil Feiler, Bank of Georgia’s director for the Middle East and north Africa.

Advanced agriculture technology, including hydroponic systems that will allow almost any vegetable or fruit to be grown in the desert, are of interest too, he added. Saudi companies are also interested in taking advantage of any opening-up, said Mr Feiler, who was recently invited to Riyadh to explore Israeli investment opportunities.

“I can see the potential to double this over the next two to three years,” he said. “But there is an illusion on both sides that Israel now has access to a huge new Arab economy, but Israel already has access to the world and the GCC [Gulf Co-operation Council] won’t be looking for every Israeli product.”

Already, the larger issues of Israeli domestic politics and the UAE’s security interests have proved complicated. Mr Netanyahu is embroiled in a controversy over whether he agreed to drop Israel’s objections to the UAE’s purchasing US-made F-35 fighter jets as part of the deal. Israeli media reported that the UAE cancelled a trilateral meeting with Israel and the US over its frustrations with Mr Netanyahu’s public denials.

Middle-East history looms large: a thaw between Israel and Qatar, which opened trade offices in Israel after the 1993 Oslo Peace Accords, was abandoned after the second intifada in 2001.

The current buzz, said a Dubai-based investment banker, is akin to the excitement in Dubai when the Iran nuclear pact of 2015 raised prospects for its emergence as a hub for investment into the Islamic republic. But large-scale trade did not revive and then Mr Trump abandoned the pact in 2018.

“It’s feels like that period after the Iran deal all over again,” he said. “We wasted a lot of time on that — let’s see how this goes.” 

Additional reporting by Katrina Manson

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