In our continuing series of monthly alerts, we summarize and discuss the key developments taking place as Bahrain and, in particular, the UAE opens to business with Israel. We focus on developments in the following sectors attributable to the Abraham Accords:
- Financial services and business relations;
- Transport and movement of people and goods;
- Technology;
- Construction; and
- Energy.
Background
On 15 September 2020 three documents were signed: (i) the Abraham Accords Declaration between Israel, the UAE, Bahrain and the U.S.A (who brokered the agreement): (ii) the Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization between the United Arab Emirates and the State of Israel; and (iii) Abraham Accords: Declaration of Peace, Cooperation, and Constructive Diplomatic and Friendly Relations between Israel and Bahrain (collectively and colloquially known as the "Abraham Accords").
At a high-level, the Abraham Accords state that their purpose is to promote interfaith and cultural dialogue in the pursuit of peace, security and prosperity in the Middle East. The Abraham Accords are available here.
The UAE abolished its Israel Boycott Law after the entry into the Abraham Accords. However, Bahrain had already abolished its own version of the law approximately 15 years ago, after signing the free trade agreement with the US.
The Arab League had called for the boycott of Israel, and the UAE and Bahrain are both members of the Arab League. However, the Arab League boycott has little impact as a number of countries have over the years opted not to apply the boycott for a number of political, economic, and other international treaty obligations.
Financial services and business relations
As noted last month, the UAE and Israel have already signed a bilateral trade agreement that will provide incentives and protection to investors who make investments in each other's countries. However, it remains to be seen whether trade between UAE, Israel and the USA (who brokered the Abraham Accords) noticeably increases. Currently, one major stumbling block is the apparent inability of the USA and the UAE to conclude a similar trade agreement.
Further, the Abraham Fund (see previous alert for details), which received a number of applications from more than 250 applicants from semi-public and private initiatives from across the region has seen its activity levels drop. Abraham Fund, was established as an extension of the US International Development Finance Corporation ("DFC"), the US government’s development bank. The director of the Abraham Fund resigned after the presidential change in the United States, and his replacement has not been appointed yet. Uzbekistan has also shown its commitment to the Abraham Fund. The DFC provides financial support through debt and equity investments, as well as other funding vehicles likes funds and certain kinds of insurances. There are currently no details available of any projects that have been funded by the Abraham Accord.
We have also seen cooperation agreements and memoranda of understanding being signed between the UAE and Israeli financial institutions to provide financial services, and at least one Israeli bank is known to have entered into discussions with the Dubai International Financial Centre and Abu Dhabi Global Markets, the offshore financial centres in the UAE.
Transport and movement of people and goods
As reported last month, the UAE and Israel have already signed treaties on direct flights and visa-free travel.
This month the UAE and Israel exchanged diplomats with UAE envoy Mohamed Al Khaja, arriving in Jerusalem. Israeli President Reuven Rivlin greeted him in person and received his diplomatic credentials. President Rivlin said, "treaties are signed by leaders, but real, sustained peace is made between peoples face to face". Mr. Khaja replied he would "work tirelessly to strengthen the political ties between [the two countries] in the service of [their people] and regional stability".
Israel has already sent its diplomat, Eitan Naeh, to Abu Dhabi to head up its diplomatic mission which commenced by opening an embassy in January.
Bahrain and Israel have signed a postal services agreement, which would allow for the transportation of communication and goods between the two countries. The postal agreement between the UAE and Israel was signed in January.
Etihad Credit Insurance and the Israel Foreign Trade Risks Insurance Corporation (ASHR’A) have also signed a corporation agreement and plan to support jointly exports, trade, and investment between the two countries. The agreement provides for the ECA guarantees to be provided by both the countries on strategic projects and trade between the countries.
Technology
Israel Aerospace Industries ("IAI") is one of the main Israeli defence firms. EDGE is the UAE's state-owned weapons manufacturer. IAI and EDGE recently announced they would jointly develop a Counter-Unmanned Aircraft System (to protect against unmanned drones). This will be the first defence collaboration between the two countries and is said to be “tailored to the UAE market, with wider ranging benefits for the MENA region and beyond”.
Gulf-Israel Green Ventures ("GIGV") and the UAE’s United Stars Group ("Stars") have recently signed a Memorandum of Understanding ("MoU"). The MoU's purpose is to bring Israeli green technologies to the UAE and allow GIGV and Stars to be involved in sustainable development projects in the UAE and across the Gulf region.
The target of these sustainable projects is to reduce emissions and build more environmentally friendly economies and societies. One current example is integrating Israeli urban green technologies into commercial and residential real estate projects, including one currently being developed on Sheikh Zayed Road in Dubai.
Construction
There have not been any material changes in the construction sector pursuant to the Abraham Accords. Watch this space in the near future for new developments.
Energy
Shortly after signing the Abraham Accords the Israeli state-owned Europe Asia Pipeline Company ("EAPC") and the UAE-based MED-RED Land Bridge ("MED-RED") signed an agreement for Emirati crude oil to be brought by tanker to an oil pipeline in the Israeli port of Eilat. The agreement will witness the Eilat-Ashkelon pipeline delivering Emirati oil from the Red Sea to the Mediterranean. EAPC has stated that delivery of Emirati oil via the pipeline will save time, fuel, and cost compared to other delivery methods.
While the EAPC and MED-RED deal serves the interests of both Israel and the UAE there is opposition to it in a few quarters. Various environmental groups are fiercely opposed to the pipeline because they say it threatens Red Sea coral reef. Egypt may also be unhappy with the deal. Oil pumped through the pipeline would otherwise have been transported by oil tankers passing through the Suez Canal. The deal therefore threatens to reduce Egypt's income from the Suez Canal. Egypt currently maintains good political relations with both Israel and the UAE, however, this deal may test those relations.
Miscellaneous
Some commentators say that one of the fundamental tenets of the Abraham Accords was to strengthen Israel and the UAE's national security positions through collaboration and arms trade. The UAE, and other states now engaged with Israel, are likely to have secured arrangements with Israel and the USA to procure weaponry more advanced than that they currently have. It is speculated that the UAE will have access to Israeli military and espionage technology. The Abraham Accords came with a handshake on the UAE's purchase of fifty US advanced F-35 fighter jets and eighteen Reaper Drones.
The Abraham Accords were signed with great fanfare and hope. However, it remains unclear whether significant trade will develop as a result with other Gulf nations.
If you have any questions please get in touch with Umera Ali, Joshua Coleman-Pecha or Jawad Elazar.
