The Abraham Accords: what now for Israel-UAE investment?

In September, Israel and the UAE (along with the US and Bahrain) signed the Abraham Accords. In what was widely seen as an important moment for the Middle East, the agreement saw an Arab country normalise relations with Israel for the first time since Jordan in 1994. Ties were cemented yet further when, soon afterwards, the countries reached preliminary agreements on a double taxation treaty and bilateral investment treaty.

In this blog, we look at some of the Israel-UAE initiatives that have since emerged and where future investments between the two countries might lie.

Banks: the early movers

The financial services sector will play a pivotal role in helping to grow economic ties between Israel and the UAE. To that end, as the Accords were being signed, Israel’s Bank Leumi, which has been exploring opportunities in the Gulf country, concluded memorandums of understanding (MoUs) with First Abu Dhabi Bank (FAB) and Emirates NBD. These MoUs will enable joint investments in both countries’ capital markets and help promote closer cooperation in banking services and payment regulations.

Oil for both East and West

A month later, the state-owned Israeli pipeline company EAPC and the UAE-based joint venture MED-RED Land Bridge signed a deal to transport oil from the UAE to Europe via a pipeline connecting the Mediterranean and the Red Sea.

In what may be the first of many potential opportunities in the hydrocarbon space, the deal should make it easier to transport oil produced in the Mediterranean and Black Sea regions to Asia, and transport Emirati oil to Western markets.

Sustainability 

Sustainability more broadly is a key issue for the two countries. The renewable energy sector will inevitably help meet the two countries’ growing need for a sustainable supply of electricity. The Emirati clean energy firm Masdar has already shown interest in expanding its renewable projects portfolio to Israel. Israel’s own expertise in renewable energy production, particularly in solar power, could benefit the UAE as it reduces its dependence on oil revenues.

Both countries have faced continuing challenges around desertification and water supply. While the UAE has historically lacked access to sustainable water resources, Israel is a global leader in efficient desalination projects, with the use of limestone and dolostone aquifers in its water-supply system.

The recent partnership agreement between the UAE-based agribusiness firm Al Dahra and the Israeli water tech company Watergen is an example of the Accords’ potential to build a significant revenue stream for Israeli companies involved in water irrigation, construction and management.

Bringing tech to finance

The tech sector has been identified as an important investment area for Israeli and UAE companies. For example, Google’s plans to build a fibre-optic network through Saudi Arabia and Israel is a salient opportunity for telecoms businesses in the region.

Meanwhile, for fintech, the deal between FinTech Hive in Dubai and FinTech-Aviv in Israel should enable knowledge sharing, talent development and greater innovation in this space. In an another move that should help the sector grow further, last month Bank Hapoalim signed MoUs with the Dubai International Financial Centre and the Abu Dhabi Global Market. The agreements aim to drive innovation in two of the Gulf’s most advanced financial centres and to help the UAE’s start-up scene, with Israeli investors drawn to its attractive tax regime and recent company law reforms.

Broadening economic co-operation

There have been a number of other initiatives that take a broader approach to boosting commercial ties between Israel and the UAE.

For example, in October, the two countries and the US established the $3bn Abraham Fund to promote economic co-operation and prosperity in the Middle East and North Africa (MENA). Once operational, the fund aims to deliver ‘people-focused investments’ that will boost regional trade, enable strategic infrastructure projects, and increase energy security and agricultural productivity. This will be an interesting development to follow, particularly as the UAE’s role as a leader in MENA could introduce Israeli investors to new markets in the region.

In another move to bring businesses in Israel and the UAE closer together, Bank Leumi along with two prominent Israeli news media outlets, Calcalist and Reshet 13, recently hosted in the Emirates the first ever Israel-Dubai conference. Attracting high-profile executives and government members from both countries, the attendees discussed collaboration and bilateral investments in various sectors, including retail, tourism, finance, hi-tech, agritech and infrastructure.

It was noted that Dubai could provide Israel with access to new global opportunities. Conversely, others highlighted that the potential collaboration between Dubai’s DP World and Israel’s Ashdod Port could see Israel serving as Dubai’s gateway to the world’s high-value shipping lines.

One of the more unique deals at the moment is Sheikh Hamad bin Khalifa Al Nahyan’s commitment to invest £69m over the next 10 years in exchange for a 50 per cent stake in Beitar Jerusalem, one of Israel's top football clubs. This could set the scene for future investment and sponsorship opportunities in the Israeli sports market.

Growing potential

The agreement between Israel and the UAE marked a major milestone in political and economic relations in the Middle East. It is still early days but these developments suggest that there is plenty of potential for commercial activity to grow.

With top-tier teams located in Tel Aviv and the UAE supported by our global network, Freshfields is well poised to act on matters that will arise in the newly remapped Middle Eastern market. Please don’t hesitate to get in touch.