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by Rachna Uppal and Lisa Barrington
DUBAI (Reuters) – The United Arab Emirates’ commitment to a long-term strategic relationship with Israel should weather political turmoil after widespread outrage over one of the most right-wing ruling coalitions in Israel’s history, analysts said. A string of recent moves and comments by Prime Minister Benjamin Netanyahu’s government have angered the public across much of the Arab world and drawn condemnation from the UAE, including Israel’s settlement policy in the occupied West Bank.
However, economic and trade cooperation – the main thrust of the UAE’s 2020 normalization of relations with Israel, breaking with decades of Arab state policy towards the Palestinian cause – has deepened.
The Comprehensive Economic Partnership Agreement (CEPA) between the two countries came into force on Saturday, eliminating or reducing tariffs on more than 96 percent of products, the UAE’s state news agency WAM said.
It was signed in May 2022 and was considered a “historic moment” by the UAE ambassador to Israel, as Israel’s first free trade agreement with an Arab country. Emirati energy major ADNOC announced last week that it took part in a $2 billion joint bid for half of Israeli offshore gas producer NewMed Energy.
Abu Dhabi’s Mubadala Energy previously acquired a 22% stake in Israel’s Tamar gas field for about $1 billion in 2021.
“(The NewMed Energy bid) demonstrates a long-term investment in Israel’s energy sector and shows how strategic the relationship has become,” said Neil Neil, associate research fellow at Chatham House and co-author of the new report on Israel-UAE normalization. Quilliam, told Reuters.
“It links the interests of the UAE with European energy security, which will be ballast against the EU’s aggressive push towards net-zero targets,” he added.
The UAE is the first Arab country in nearly three decades to establish diplomatic ties with Israel in a U.S.-brokered agreement that also includes Bahrain, the so-called Abraham Accords. The deal is part of a wider alignment of regional alliances driven by shared concerns about Iran. But political developments are testing the diplomatic relationship between the two countries.
In addition to the UAE’s condemnation of Israel’s settlement decisions, Israeli Finance Minister Bezalel Smotrich said there was no such thing as a Palestinian people, sparking outrage across the Arab world.
This comes against the backdrop of a huge conflict in Israel over judicial reform, and Prime Minister Benjamin Netanyahu, who led the previous government when the Abraham Accords were signed, has not yet visited the UAE.
The UAE Ministry of Foreign Affairs and International Cooperation did not respond to a request for comment on the political tension in the relationship between the two countries.
Asked why Netanyahu had not yet visited, the Israeli government official said the bilateral relationship was “growing stronger” and referred to recent trade deals.
Commercial push
Israel has largely been cut off economically and politically from its Middle Eastern neighbors, viewing the relationship as a way to secure new business opportunities in the Gulf and beyond. The UAE is advancing cooperation with Israel in the fields of finance, energy, security, technology and water security.
Recent moves to boost trade and investment have signaled to businesses on both sides that political tensions should not dampen interest in the economic relationship.
Bilateral non-oil trade between the two countries exceeds $2.5 billion in 2022, a figure the UAE hopes to grow to $10 billion by 2030.
Abdulkhaleq Abdulla, an Emirati political commentator, said: “Israeli politics is certainly difficult, with many ups and downs. But the Abraham Accords were a strategic decision and it will continue no matter what happens in Israel.”
The Dubai International Chamber of Commerce, which opened an office in Tel Aviv in December, says about 1,000 Israeli companies already operate in the UAE.
On Thursday, Israel also announced seven additional weekly flights, adding to the dozens already operated by the two countries. Israel’s CEPA is part of a wider UAE strategy to forge global partnerships to support and diversify its economy.
The strategic I2U2 Group meeting of India, Israel, the UAE and the US, an economic cooperation group formed last year, was held in the UAE in February.
“There will be stress and tension in the relationship, and it will even call into question its durability,” said Chatham House’s Quilliam.
“No matter how bad things get, the economic aspect of the partnership will sustain it through tough times”.
(Reporting by Rachna Uppal and Lisa Barrington; Editing by Toby Chopra)
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