Thursday, 6th September 2018

UAE: Gentle push-back from MBR against Abu Dhabi’s adventurism

The diplomatic community in the UAE is still weighing the significance of a series of early August tweets by federal Vice President and prime minister and Dubai Ruler Sheikh Mohammed Bin Rashid Al-Maktoum, in which ‘MBR’ criticised politicians who failed to focus on facilitating and managing change “in their own backyards”. In a trio of messages on 4 August, MBR tweeted that “great achievements speak for themselves, not empty speeches with meaningless words” and that the Arab world had a “surplus of politicians” but “a shortage of administrators” who were focused on the plight of the people and on delivering concrete improvements.

MBR’s tweeted philosophy chimes with his approach to developing Dubai as a global city state; he has shown little interest in foreign policy confrontations and has focused instead on developing infrastructure and a domestic environment to enable economic progress – even if that has at times led to spectacular crashes, as in the Dubai debt crisis of 2008/09.

MBR is known to be social media-savvy; he habitually seems to enjoy a summer tweeting ‘season’. Last year he focused on self-reliance and ensuring that organisations were fit for the future. Some observers suggest his emphasis this year may have been prompted by the increasingly significant economic fall-out generated by the war in Yemen and the confrontation between the UAE and both Iran and Qatar.

Instances of these conflicts’ economic impacts abound, for example on Dubai-based airlines that used to have 13 direct flights to Qatar every day. The suspension of those routes is commercially significant in itself, but they also generated substantial connecting traffic for long-distance flights. The latest annual report from Emirates Group noted 4,658 fewer flights being handled at Dubai’s two airports in the 12 months to March 2018, “mainly due to the termination of flights between Dubai and Qatar”.

Large numbers of businesses used to service Qatar from bases in Dubai, just as the port at Jebel Ali was the principal export-import facility for goods destined for Doha. Not only have Dubai-based enterprises lost the business generated by the Qatari market, there is a growing likelihood that the loss of market share will be permanent as sanctions persist and the Qatari economy develops the ability to manage on its own.

These are not problems of Dubai’s making, as it has been the UAE’s pre-eminent political palyer, Abu Dhabi Crown Prince Mohammed Bin Zayed (MBZ), who has been leading the way within the UAE with the anti-Qatar policy, with the support of his Saudi counterpart Crown Prince Mohammed Bin Salman. Dubai has stayed silent in public over the damage being done to its economy, but recent developments may have tipped the balance, persuading MBR that now is the time to counter the influence of the two crown princes.

One product of the UAE’s involvement in the Yemen war has been a battle for influence on the western seaboard of the Red Sea, which in turn fed into the Djibouti government’s unilateral termination in February of DP World’s contract to run the Doraleh Container Terminal (GSN 1,064/51,055/6). To make matters worse, DP World – which is 80% owned by the Dubai government – now feels obliged to take legal action against the Chinese state-owned China Merchant Group (CMG), which it fears is being brought in to run the container terminal and nearby free zone in its stead. Hong Kong-based law firm Deacons is preparing to lodge a claim against CMG in Hong Kong. MBR will not be happy the war in Yemen has brought DP World into conflict with the Chinese authorities – it is the sort of political imbroglio Dubai has always sought to eschew while it builds itself up as a global trading hub.

Worse may yet be to come, as Dubai faces having its links with Iran further curtailed as a consequence of US sanctions against Tehran. Emirates and FlyDubai serve five destinations in Iran, which bring lucrative inter-connecting traffic; Jebel Ali is still the primary port through which goods reach and leave Iran. Dubai’s property market has relied on Iranian purchasers for a significant chunk of activity. These and other links are now threatened by the tightening of sanctions, which has been promoted by Abu Dhabi and Riyadh even as the cost falls heavily on Dubai. At a time when preparations to host Expo 2020 should be delivering an economic upswing, Dubai’s GDP growth has instead been flat-lining.

MBR will not wish to have any form of public spat with MBZ. He has taken recently to pointedly referring to MBZ as his ‘brother’ in official statements. By instinct, the canny Dubai ruler will seek to moderate Abu Dhabi’s policy line rather than embark on full-scale confrontation. But the economic risks facing Dubai appear to have forced MBR into taking a more robust line and already there are indications it is having some effect. There appears to be a subtle re-ordering of primacy in the UAE, where MBR is now being ranked ahead of MBZ in official statements.

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