Stars and strife: rebuilding UAE-US relations

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• Perception GCC was not Biden priority before oil price shock
• UAE export market for US worth $16.7bn
• Primary economic partners include India, South Korea and the UK

The passing of UAE President Sheikh Khalifa has prompted an outpouring of condolences and support from around the globe, with heads of state being hurriedly dispatched to Abu Dhabi. 

Particularly notable among these was the high-profile delegation sent by the US; headed by Vice-President Kamala Harris, it included nearly all of the administration’s top national security aides, from the secretaries of state and defence, the head of the Central Intelligence Agency, to high-ranking White House officials.

The seniority of the delegation was undoubtedly aimed at signalling the strength of the US’ commitment to the region which has come under increasing strain of late. In March, Yousef al-Otaiba, the UAE’s ambassador to the US, said UAE-US relations were undergoing a “stress test.”

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“Rightly or wrongly, the perception on the ground has been that the GCC was not a priority for the Biden administration until the recent oil price shock triggered by the Russia-Ukraine conflict,” Wesley Schwalje, COO at Tahseen Consulting, a Mena-focused public sector strategy and public relations firm, tells AGBI.  

“The GCC countries’ response to the conflict in Ukraine has been to call for a political settlement despite its neutral stance leading to further deterioration of ties with the United States.”

Many of the issues that were sources of tension in the US-UAE relationship remain unresolved, such as oil production and the UAE’s relationship with Russia

Kristian Ulrichsen, Middle East Fellow at Rice University’s Baker Institute

Furthermore, Russia’s invasion of Ukraine has dramatically increased the importance of Gulf oil producers as the US looks to cut its Russian energy dependence. The reluctance of OPEC heavyweights Saudi Arabia and the UAE to hike output has further compounded the strain. 

But despite these geopolitical divergences, the US and UAE share many commercial interests. 

Total trade between the two countries hit $22.4bn last year. The UAE ranked as the 20th-largest export market for the US and its largest export market in the MENA region, with $16.7bn worth of exports delivered in 2021, and more than 1,500 US companies operating in the country.

For its part, the US imported $5.6bn of goods from the UAE in 2021.  

Non-oil trade has shown significant growth in recent years, rising from $5.22bn in 2005 to $17.83bn in 2020. The same year, the UAE invested $45 billion in the US, which in turn is estimated to have generated around 17,000 US jobs. 

During the US delegation’s visit, the newly-elected UAE President, Sheikh Mohammed bin Zayed bin Sultan Al Nahyan, said his country “looked forward to strengthening strategic relations” with the US. 

US Vice-President Harris echoed his statement in her parting remarks to reporters: “We were here to discuss the strength of that partnership and that friendship and our commitment going forward … to reaffirm the shared commitment we have to security and prosperity in this region.”

According to senior US officials, Harris wanted to use the visit to emphasise the intent to deepen ties across areas ranging from security and climate change to space, energy and commerce. 

“While security and counterterrorism cooperation have always been mutual priorities, what a relationship restart might mean for future cooperation is likely still to be hashed out. This dialogue is likely to be shaped by mutual interests surrounding the Abraham Accords, countering Iran, the global energy transition, and boosting bilateral trade and investment,” says Schwalje. 

“Abu Dhabi will also be looking for ways to trim the trade deficit with the US while also advancing opportunities for its sovereign wealth funds and reducing market access issues for national champions.” 

UAE invests in R&D in the US

To date, the UAE has been particularly active in investing in research and development in the US, allocating more than $1.7bn to activities related to innovation and technology. 

Speaking at the UAE-US Innovation and Investment Summit in January this year, Dr. Ahmad Belhoul Al Falasi, UAE Minister of State for Entrepreneurship and SMEs, said that UAE companies are keen to invest in technical industries, smart chip manufacturing, semiconductors, IT projects, and 5G communication networks, among others. Such investments will help underpin the UAE’s Fourth Industrial Revolution strategy which it launched in September 2017. 

“The UAE connectivity Agenda depends on the flow of four important areas. Goods (including energy), money (including digital financial services), people (including aviation, rail, and tourism) as well as data including harvesting, securing, transmission, encryption and processing of data which is critical to the fourth industrial revolution the UAE is investing in,” Mohammed Baharoon, Director General at b’huth, a Dubai public policy research centre, tells AGBI. 

“This opens up a huge range of opportunities for cooperation, from marine security to high-tech industry, infrastructure development in various areas from food and water security, to health and space exploration.”

Yet economic cooperation is just one dimension of a strategic relationship and some industry experts speculate that the prevailing notes of geopolitical discord between the two countries may impact their broader relations. 

Unresolved issues in US-UAE relationship

“Many of the issues that were sources of tension in the US-UAE relationship remain unresolved, such as oil production and the UAE’s relationship with Russia,” Kristian Ulrichsen, Middle East Fellow at Rice University’s Baker Institute tells AGBI. 

“As little substantive has changed in the distribution of power in the UAE, given that Mohammed bin Zayed was already a decision-maker, these issues may continue to cause friction.” 

In December last year, as part of celebrations to mark the 50th anniversary of its founding, the UAE unveiled its strategic roadmap for the next half-century in which it outlined some of its key principles. Notable among them was the following principle: “The Emirates’ foreign policy is a tool that aims to serve our higher national goals, the most important of which is the Emirates’ economic interests.’ 

UAE’s priority economic partners

It subsequently identified the countries that it sees as its future economic partners; singling out Israel, Turkey, India, the UK, South Korea, Indonesia, Kenya and Ethiopia as partners for trade and investment. 

Then in February this year, the UAE and India signed a Comprehensive Economic Partnership Agreement that is expected to boost non-oil trade between the two countries to $100 billion in five years, from $60bn currently. Bilateral trade is expected to reach $250bn by 2030.

“The focus of UAE economic and energy partnerships and interests has been shifting eastward for more than a decade, regardless of the state of the political and security relationship with the US,” says Ulrichsen.

“This process of diversification in patterns and flows of trade is likely to continue and may become more geo-economic in nature as it intersects with policymakers’ perceptions of US disengagement from the region. Especially as the UAE moves out of the pandemic, I would expect to see officials focus more heavily on trade than on the confrontational geopolitics of the post-Arab Spring decade.” 

Baharoon believes it would be mistaken to dismiss the strength of US-UAE relations too quickly. 

“Most of the fault lines in the relationship have happened in the political arena, but lately the security relationship has been affected which used to be the strongest,” he tells AGBI. 

“As it stands today, neither the relationship with Russia nor with China come close to the extent of the UAE’s relationship with the US. It’s a strategic miscalculation by many analysts to think that the UAE position on Russia is a replacement of its relationship with the US, or even that with Europe. A keen understanding that the UAE is thinking globally not only regionally will help foster a better alignment of policies and projects.”