The United Arab Emirates is no stranger to using its wealth as a tool of international relations. Since accumulating oil wealth, it has spent considerably on grants and investments in friendly states. Initially this was motivated by security: small states making themselves economically valuable in exchange for protection against larger, potentially predatory neighbours.
Over time, however, Abu Dhabi’s ambitions have grown. Today it is investing deeper and further afield than ever before. While security remains a consideration, increasingly its economic diplomacy is key to its foreign policy priorities.
There has been a spate of Emirati investment announcements and trade agreements recently. Some of these follow similar patterns to before: larger but poor Middle Eastern allies accepting Emirati funds in exchange for a loose security alliance. For example, in early June Abu Dhabi signed a $10bn industrial partnership with Egypt and Jordan. Similarly, funds continue to flow into western allies, also grateful to receive investment during economic hardships. Last year the UK, one such beleaguered economy, welcomed $10bn for investment in hydrogen production and other key infrastructure.
Yet at the same time Abu Dhabi is expanding its economic footprint. Within the Middle East it normalized ties with Israel and the two states have since agreed a free trade agreement, with trade rising to $700m in 2021 and expected to rise further. Another former adversary, Turkey, was reconciled last November, a deal sweetened by $10bn of UAE investment.
But it is beyond the region that the UAE’s economic diplomacy strategy becomes apparent. Just before the agreement with Israel, Abu Dhabi signed a similar deal with India with the goal of boosting non-oil trade from $60bn to $100bn within five years. Similar deals are under negotiation with Indonesia and South Korea. Meanwhile the UAE is deepening its economic footprint in Africa. Building on a military and trade presence in the Horn. $6bn is to be invested in Sudan, while in West Africa, a $20 million credit line has been agreed between Abu Dhabi and the Economic Community of West African States Bank for Investment and Development.
Furthermore, the UAE has boosted economic ties away from the West. China is already the UAE’s second biggest trade partner, enthusiastically signing deals with Beijing as part of the Belt and Road Initiative in 2019. While Russian trade is less important, the UAE (like most other Middle Eastern states) has declined to join sanctions on Moscow following its invasion of Ukraine.
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What explains this considerable widening and deepening of international Emirati investment? Firstly, there is an economic logic. The UAE economy continues to expand, and its government are constantly seeking new opportunities. While there are geopolitical and diplomatic incentives at play, they are not completely divorced from the desire to boost revenues. This is one significant shift from the 1970s and 80s, when grants were sent to worse-off neighbours, with little hope of a return. Investments beyond these volatile economies have more hope of success. Related to this is Abu Dhabi’s continued effort to diversify beyond oil wealth, a goal it shares with other Gulf states, with investment in developing economies and green energy making commercial sense.
Looking to geopolitical motivations, the United States and its western allies are seen as retreating from the Middle East and less influential globally than before. While Washington and London continue to have a military and economic presence in the Gulf, they are now joined by China, while Russia has expanded its footprint in the Levant. As a result, the UAE is using investment to hedge its bets: maintaining its alliance with the west, while diversifying its ties. While once it only needed to make sure it was valued by Washington to feel secure, now it must also woo Beijing, Moscow and emerging powers like India. More locally, financing reconciliation to blunt potential threats from Turkey and Israel has a similar logic.
But parallel to this defensive strategy are wider, expansive ambitions. Under the leadership of MBZ the UAE has punched above its weight, in both the Middle East and globally. In the 2010s there was an effort to get more involved in regional politics, intervening in Libya, Yemen and elsewhere. With these arenas stalemated or resolved, the UAE has changed tack, looking for alternative routes to enhance their influence, with economic diplomacy increasingly preferred. This influx of Emirati capital into emerging economies is not about cultivating clients but more increasing the UAE’s diplomatic clout through investment. Abu Dhabi hopes that greater foreign investment will equal a louder voice on the world stage.