Dubai Gets Its Way as Business Trumps Regional Strife

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Dubai Gets Its Way as Business Trumps Regional Strife

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(Bloomberg)-25/11/2021

Fatma Emrem’s phone has been ringing non-stop since the United Arab Emirates and Turkey repaired ties. A partner at Tamim Consulting, Emrem advises mostly Turkish companies setting up in the UAE commercial capital, Dubai.

“Their main question is how confident should we be that good relations will continue,” she said. “They’re encouraged by recent reforms and lower company setup costs but they want to be sure politics won’t disrupt their business in the future.”

It’s been a rapid turn-around since the UAE unveiled its foreign policy reset in September, vowing to step back from political conflicts and refocus on the economy — targeting $150 billion in investments through deeper  links with fast-growing economies, including Turkey’s.

The shift is part of a broader realignment that’s seen erstwhile Middle East rivals overcome sometimes violent differences as the U.S. disengages from the region. After a decade of interventionism that cost billions in lost opportunities, it’s also the clearest sign yet that Dubai’s business-focused model has won out.
A pearling town bereft of the oil that’s enriched Abu Dhabi, the largest of the UAE’s seven sheikhdoms, Dubai transformed itself into a global financial center by sidestepping regional conflicts and pitching itself as a stable, tax-free harbor in a sea of troubles.

It was Dubai that pushed for a review of foreign policies that had left the UAE with a growing list of enemies, said two people familiar with the matter. Attacks on Saudi oil facilities in 2019 and disruption of shipping in the Persian Gulf sharpened the focus on the UAE’s vulnerability, they said, but increasing competition from Saudi Arabia ultimately persuaded Abu Dhabi to change course.

The government did not immediately respond to a request for comment.

Business topped the agenda when the UAE’s de facto leader met his Turkish counterpart Wednesday, turning the page on a decade of strained ties and poisonous rhetoric to launch a $10 billion fund to invest in the country during a time of financial upheaval.

Already, ads for Turkish companies have appeared on electronic billboards outside Dubai’s World Trade Center. A Turkish pavilion was hurriedly tacked on at Dubai Expo and a senior business delegation arrived just ahead of Sheikh Mohammed bin Zayed Al Nahyan’s landmark Ankara visit.

“They’re going back to basics; to Dubai’s classic philosophy of non-intervention, neutrality and business-first approach,” said Jim Krane, author of the 2009 book ‘City of Gold: Dubai and the Dream of Capitalism.’ “Abu Dhabi’s policy of choosing sides and picking fights has been bad for the economy. They realized this is not a successful strategy.”

Back to Business

The economic impact could be significant as the shift dovetails with higher oil prices and a global recovery from Covid-19.

When the UAE joined Saudi Arabia, Egypt and Bahrain in boycotting Qatar back in 2017 over its ties to Islamist groups and Iran, it erased at least $3.5 billion in annual trade overnight and deprived UAE-based companies of opportunities as its neighbor prepared for the 2022 soccer World Cup, building stadiums, hotels and roads. Qatar, which previously bought most construction materials from the UAE, was forced to find new suppliers. Shipments were rerouted to Omani ports.

Trade with Turkey slumped 44% in 2018, after the Qatar spat pulled it into the fray. Also supportive of Islamists, Turkey deployed troops to Qatar, further straining ties. The following year, the two countries entered Libya’s civil war on opposing sides.

Meanwhile, the UAE supported Donald Trump’s decision to quit the Iran nuclear deal and reimpose sanctions in 2018. Trade with Iran more than halved to $5 billion the following year, Bloomberg data show.  On the same day as the landmark Ankara visit, Iran’s Deputy Foreign Minister met senior officials in Dubai and announced a “new page” in relations.

“The consensus was that it’s now time to cool tensions after 10 years where Dubai paid a price,” said Abdulkhaleq Abdulla, a UAE political science professor.

Easing tensions are already rippling down Dubai Creek, where small wooden ships known as dhows have for decades criss-crossed the narrow stretch of sea to Iran.

A native of Iran’s Bushehr province, Mohsen Abdulla and his 10-man crew used to make a dozen trips a year before U.S. sanctions snapped back. That fell to three as restrictions tightened.  Dubai’s trade with the Islamic Republic surged b ack to pre-sanctions levels this year.

“The past five years were very tough and we faced troubles at both ends,” said the 38-year-old, as workers stacked boxes of microwaves, vacuum cleaners and air conditioners onto his newly-built dhow. “Business started improving this year.”

No Real Change      

For the most part, Dubai’s laissez-faire approach hasn’t been out of step with the wider UAE. It was after the 2011 Arab Spring uprisings that differences began to emerge.

For Abu Dhabi, staving off the revolutionary forces sweeping the Middle East took precedence over luring foreign investors, an outlook partly driven by what diplomats say is MBZ’s preoccupation with security.

Chastened by a bailout from its wealthier neighbor in the midst of the global financial crisis three years earlier, Dubai toed the line even as economic concerns grew.

As the tumult that followed those uprisings calms and Islamists lose influence across the region, Abu Dhabi is more comfortable shifting focus.

In Libya, the UAE’s bet on a Russian-backed general to overthrow the internationally-recognized Tripoli government never paid off. The Yemen war drew international criticism and, as it dragged on, top officials found themselves making repeat visits to the families of fallen soldiers in the less wealthy, and sparsely populated, northern emirates.

That’s not to say the UAE would stand aside if such threats re-emerged.

“The counter-revolutionaries have won for the time being, but if there was another Arab Spring 2.0 or other uprisings, the Emiratis will be firmly on the counter-revolutionaries’ side,” said Andreas Krieg, a lecturer at King’s College in London who has advised Qatar. “They haven’t changed in that way.”

It’s Saudi Arabia’s effort to open up its economy and establish itself as a Middle East base for multinational firms, that came as a wake-up call. With its geographical reach, political clout and untapped potential, the world’s biggest oil exporter is an imposing competitor.

In the UAE’s favor, stands Dubai, which has already established itself as a place to do business.

At a warehouse in Dubai’s Jebel Ali Free Zone, Mehmet Sirin Akyuz inspects crates of diapers manufactured at the Turkish firm’s Gaziantep base and destined for re-export to Africa.

In the 13 years he’s managed the Dubai operation, it’s never been affected by regional disputes, including with Turkey, a vindication, he said, of Dubai’s approach.

“The way we see it politics changes but business is for the long run,” he said. “For us, stability and continuity are the most important elements.”

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