Introduction
Since its establishment in 1981, the Gulf Cooperation Council (GCC), a regional political and economic organization comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE), has sought to foster cooperation and coordination between the six monarchies, with relative success. Under the de facto leadership of Saudi Arabia, the GCC emerged as arguably the most effective regional cooperation organization in the Arab world. It launched common economic projects to promote and facilitate integration, established a customs union and a common market, and created the GCC Interconnection Grid, which connects the power grids of member states. The GCC even set up a military unit, the Joint Peninsula Shield Force.
Nevertheless, intensifying economic competition between Saudi Arabia and the UAE has long affected the efficacy and integrity of the GCC. In 2009, for example, the UAE withdrew from the GCC project to form a monetary union and introduce a single currency because of the organization’s decision to establish its proposed central bank in Riyadh rather than Abu Dhabi. The beginning of the second decade of the 2000s witnessed a period of close cooperation between Saudi Arabia and the UAE, but this proved to be short-lived, as their growing rivalry manifested itself in differing approaches to regional conflicts, greater economic competition, and unilateral attempts to exert political influence abroad.
Indeed, competition over leadership of the Middle East has led to increasingly divergent foreign policies. The assertive and independent approach pursued by the UAE threatens Saudi Arabia’s regional ambitions as well as its dominant status within the GCC. Meanwhile, fear of Saudi hegemony among the GCC countries has hindered further integration between the organization’s member states, and Riyadh’s reluctance to relinquish its dominance is damaging the cohesion of the organization. Moreover, the challenges and complexities of maintaining unity and cooperation within the GCC have been exacerbated by a personal rift between Saudi Arabia’s Crown Prince Mohammed bin Salman and the UAE’s President Mohammed bin Zayed.
How Once Tight Saudi-Emirati Ties Came to Fray
Following the outbreak of the Arab Spring uprisings in December 2010, Saudi Arabia and the UAE came to share an interest in opposing the growing wave of democratic and Islamist movements, both domestically and across the Middle East and North Africa, while simultaneously countering Iran’s growing influence in the region. Notably, at the request of the Bahraini government, the GCC’s Joint Peninsula Shield Force was deployed to Bahrain in March 2011 in order to crush anti-government protests. The force in question consisted of around 1,000 Saudi troops and 500 Emirati police personnel.
Relations between Riyadh and Abu Dhabi grew even closer when Saudi Arabia’s King Salman bin Abdulaziz ascended the throne in January 2015, following the death of his half-brother Abdullah. In March 2015, less than two months after his appointment by the new king as minister of defense, Mohammed bin Salman launched Operation Decisive Storm, an ambitious military intervention by a coalition of nine countries—spearheaded by Saudi Arabia—to restore the government of ousted Yemeni president Abd Rabbu Mansour Hadi. While all of the GCC countries, with the exception of Oman, committed forces to the Saudi-led coalition, the number of Emirati troops was second only to that of Saudi Arabians; approximately 3,500 Emirati troops were deployed to Yemen, with an additional 3,000 air- and sea-based personnel providing support.
The diplomatic rift with Qatar marked a division between GCC members, but Saudi and Emirati foreign policy remained in lockstep. In June 2017, Saudi Arabia, the UAE, Bahrain, and Egypt severed diplomatic ties with Qatar, primarily in response to the latter’s alleged support for regionwide Islamist groups such as the Muslim Brotherhood. This undermined the unity of the GCC and its effectiveness as a regional bloc, and also deviated from the organization’s decisionmaking protocols. At the same time, it served to bring Saudi Arabia and the UAE closer together. Indeed, at the GCC summit in Kuwait in December 2017, the UAE announced that it had formed a new political and military alliance with Saudi Arabia, thereby casting serious doubt over the future of the GCC.
The Saudi-Emirati synchronicity did not last. In 2018, the two countries’ interests began to diverge over Yemen. Saudi Arabia had given its full backing to the internationally recognized Hadi government, while the UAE had begun funding a network of local proxy militias of its own creation whose objectives were at variance with those of the Hadi government. A major source of disagreement between Riyadh and Abu Dhabi was the composition of Hadi’s government, which included members of Yemen’s Islah movement, an Islamist umbrella group closely affiliated with the Muslim Brotherhood. Whereas Saudi Arabia was amenable to cooperating with the Muslim Brotherhood in Yemen, the UAE was very much opposed to the organization.
When the UAE announced in July 2019 that it had begun a “strategic redeployment” of its troops from Yemen, it became clear that the coalition’s two pillars no longer saw eye-to-eye. Furthermore, as the UAE reduced its troop presence in Yemen, it simultaneously increased financial support for its Yemeni proxies, most of which operate in the south. In particular, the Emiratis backed the Southern Transitional Council (STC), a secessionist organization with significant influence in southern Yemen. The UAE’s support of the STC undermined both the Saudi-led coalition’s war effort and the legitimacy of the Saudi-backed Hadi government, placing Abu Dhabi and Riyadh at loggerheads. With Emirati backing, the STC and allied secessionist factions seized control of Aden from the Hadi government on multiple occasions before returning control of the city to the government at the request of Saudi Arabia. It became apparent that the UAE’s overarching agenda in Yemen was not the restoration of the Hadi government but rather control of Yemen’s strategic maritime locations. This ushered in the current and ongoing period of geostrategic rivalry between Saudi Arabia and the UAE.
The Underlying Economic Reasons for the Saudi-Emirati Rift
Over the past few decades, the UAE has risen to prominence as a regional hub for commerce and tourism. Meanwhile, Saudi Arabia has embarked on its own process of economic transformation and diversification, driven by Mohammed bin Salman and the Vision 2030 initiative that he introduced in 2016. Slowly but surely, this process has led to increased competition between the two neighboring countries, a phenomenon that is likely to continue and even accelerate. Moreover, such economic competition has periodically translated into a strained political relationship.
Many companies seeking to expand into the Middle East have set up their regional headquarters in the UAE because of its attractive business environment and investor-friendly policies. In particular, the emirate of Dubai has regularly ranked among the top five global shipping centers in recent years. To steer its economy away from dependency on hydrocarbons, the UAE has focused on establishing itself as a global logistics and trade node, with Dubai’s Jebel Ali Port serving as the key maritime nerve center linking Africa and Asia. In line with this objective, the UAE has pursued a “string of ports” strategy across the southern Arabian Peninsula and the Horn of Africa, aiming to control and operate key ports along the region’s major maritime trade routes.
Saudi Arabia is attempting a similar feat. The three main objectives of Vision 2030 are to position Saudi Arabia as the “heart of the Arab and Islamic worlds,” turn it into a “global investment powerhouse,” and make it a “global hub connecting three continents, Asia, Europe and Africa.” Yet despite Saudi Arabia’s announcement of a multitude of ambitious new projects to support its plans, such as Neom and the Red Sea Project, the UAE still leads the region in terms of foreign direct investment (FDI). According to a report published by the United Nations Conference on Trade and Development, the UAE recorded its highest ever FDI inflow (nearly $23 billion) in 2022, while Saudi Arabia’s FDI inflow dropped by 59 percent (to nearly $7.9 billion) during the same period.
To attract foreign investment, Saudi Arabia has implemented a host of new economic policies in recent years, some of which pose direct challenges to the UAE. In July 2021, Riyadh imposed restrictions on imports from GCC countries to eliminate tariff-free market access for goods made in economic free zones. The UAE hosts over forty such zones, with the aim of attracting FDI through granting distinct advantages—customs tax exemption, zero currency restrictions, repatriation of capital and profits, and 100 percent foreign ownership rights—to the businesses operating within such zones. Goods entering Saudi Arabia that are manufactured by companies whose workforce is more than 75 percent foreign, and industrial products with less than 40 percent added value, are no longer tariff-free. Observers have interpreted this as a direct targeting of the UAE, where Emirati nationals make up only 10 percent of the population. The new Saudi restrictions also included goods manufactured with Israeli input. This was notable, given the UAE’s normalization of relations with Israel under the Abraham Accords agreements in 2020.
Saudi Arabia issued a new set of restrictions in December 2022. By limiting the ability of Saudi government agencies to do business with companies not headquartered in the country, Riyadh hopes to encourage multinational corporations to set up their regional headquarters in Saudi Arabia. The controls will enter into effect in January 2024, with Riyadh aiming to entice up to 480 companies into setting up their regional headquarters in Saudi Arabia by 2030. These new restrictions are widely considered a direct challenge to the UAE’s status as the preferred Gulf destination for international companies’ regional headquarters.
An additional reason for Saudi-Emirati rivalry stems from the two countries’ differing conceptions regarding the role of the Organization of the Petroleum Exporting Countries plus eleven other oil-exporting countries (OPEC+), of which they are both leading members. Saudi Arabia has used its leverage within OPEC+ to force oil production cuts among all member states. The UAE raised concerns about this approach in July 2021, calling for production quotas to be increased, and was reported to have considered leaving OPEC+. Although the quota issue was ultimately resolved and senior Emirati officials said that the UAE had no plans to leave OPEC+, the dispute was evidence of a deepening Saudi-Emirati rift.
Implications of Continued Saudi-Emirati Rivalry
The intensifying competition between Saudi Arabia and the UAE, the two most populous countries and largest economies in the GCC, is a worrying prospect for the organization’s future, as it hampers cooperation and integration between the six member states. For one thing, the GCC has only just begun to recover from the impact of the diplomatic crisis with Qatar, which was resolved in January 2021. Worse yet, the blockade on Qatar set a precedent for the handling of GCC internal disputes outside of the organization, rather than through the GCC’s Dispute Settlement Commission. The Wall Street Journal reported that, during a private conversation with local journalists in December 2022, Mohammed bin Salman even threatened to impose a similar blockade on the UAE. He reportedly told the journalists that he had sent the UAE a list of demands that, if not met, would result in punitive measures.
Although a Saudi boycott of the UAE is unlikely, the emerging trade war between Riyadh and Abu Dhabi has already affected the functioning of the GCC in several ways. For example, the import restrictions that were implemented unilaterally by Saudi Arabia in 2021 have undermined the stated objectives of the GCC Customs Union of “eliminating the tariff and non-tariff barriers in order to facilitate intra-GCC flow of goods, and create a collective bargainer power for the GCC States to liberate trade with other international economic blocs, in addition to coordinating export and import policies.”
The Saudi-Emirati rift also threatens to obstruct the GCC’s ongoing free trade agreement (FTA) negotiations with major international partners, including China, India, Japan, and the United Kingdom. Indeed, Saudi Arabia and the UAE have begun gravitating toward securing bilateral deals. While GCC member states have signed bilateral trade agreements with non-GCC countries in the past, such as Bahrain’s and Oman’s FTAs with the United States in 2006 and 2009 respectively, the increasing frequency of bilateral trade deals that bypass the GCC casts doubt on the purpose of the organization.
For example, since 2022, the UAE has signed four comprehensive economic partnership agreements—with India, Indonesia, Israel, and Türkiye—covering trade, investment, and cooperation. Likewise, Saudi Arabia signed several trade agreements with Türkiye in March 2023. The UAE is also participating in a growing number of “minilateral” partnerships, which are informal, as well as more targeted initiatives consisting of fewer states and intended to address specific threats, contingencies, or security issues. These include the I2U2, the Negev Forum, and the India-UAE-France trilateral cooperation initiative. In pursuing such an approach, the Emiratis appear to be hedging against the future of the GCC by creating alternative avenues for regional cooperation. Participation in these minilateral partnerships could also serve as a safety net in the event that the UAE is ostracized by the GCC, as Qatar was in 2017.
Just as important is the fact that the GCC is finding it increasingly difficult to adopt a unified stance on regional issues. Major decisions, such as Saudi Arabia’s rapprochement with Iran or the UAE’s normalization agreement with Israel, the likes of which are typically first discussed within the GCC, have been made unilaterally. This has further diminished the relevance of the organization as a regional bloc. Moreover, because of their ambitious foreign policies, Saudi Arabia and the UAE are even beginning to butt heads farther afield. Aside from their competing interests in Yemen, Riyadh and Abu Dhabi have supported opposing factions in the conflict in Sudan as part of an emerging competition for influence in the Horn of Africa.
Signs of a personal spat between Mohammed bin Salman and Mohammed bin Zayed have added a new dimension to the rivalry between Saudi Arabia and the UAE. Indeed, the feelings of betrayal expressed by the Saudi crown prince during his meeting with local journalists and reported by the Wall Street Journal, and his threats to take action against the UAE, suggest that the tensions between Riyadh and Abu Dhabi are about more than strategic rivalry. The two leaders once enjoyed a close personal relationship, with Mohammed bin Zayed, who backed the rise to power of Mohammed bin Salman, portrayed as the latter’s mentor. But since the rare public disagreement between Saudi Arabia and the UAE over OPEC+, personal frictions between Mohammed bin Salman and Mohammed bin Zayed have become increasingly apparent. Mohammed bin Zayed’s absences from the China-Arab states summit in Riyadh in December 2022 and the Arab League summit in Jeddah in May 2023, as well as Mohammed bin Salman’s notable non-attendance at a summit of Arab leaders in Abu Dhabi in January 2023, indicated as much. This personal dimension is particularly worrying for the GCC because whereas diplomatic rifts can heal seemingly overnight, personal feuds are not so easily managed.
Conclusion
There is no escaping the fact that the GCC is facing a complex internal challenge in which arguably its two most influential member states, and their respective leaders, are at odds with each another. The geostrategic rivalry between Saudi Arabia and the UAE has the potential to disrupt stability and cooperation within the GCC as well as in the wider Middle East. This could lead to the GCC’s fragmentation, as has already been seen with the UAE’s growing participation in minilateral partnerships. It is likely that other GCC member states will attempt to mend such a rift, or at least prevent it from widening. However, the success of mediation would depend heavily on the willingness of Mohammed bin Salman and Mohammed bin Zayed to set aside their personal differences. Today, this prospect seems far-fetched.