The Israel-Hamas war unfolded amid an apparent regional trend of peaceful coexistence. The Middle East’s transformation along these lines has been represented by the seemingly ever-closer alliance between Saudi Arabia and the United Arab Emirates, as symbolized by the apparent friendship between their respective de facto leaders, Mohammed bin Salman and Mohamed bin Zayed. The two countries united to counter Qatar’s expanding soft power in the Arab world, as exemplified by the unsuccessful blockade they imposed on it in 2017. They have been on the same side in their military campaign against the Iranian-backed Houthis in Yemen since 2014. And they have mutually approached Beijing and Moscow, adopting a more independent policy that diverges from their traditional alliance with the United States.

But what lurks beneath the surface of this apparent fraternal alliance is a quiet struggle, as both countries vie for leadership within the Arab world. Behind the scenes, Saudi Arabia and the UAE are waging an active geoeconomic competition in multiple dimensions.

First, there is a massive competition for foreign investment. The rivalry traces back to 2009, when Abu Dhabi objected to the proposed location of the headquarters for a Gulf Cooperation Council (GCC) central bank in Riyadh, which ultimately played a role in thwarting the establishment of the bank itself. Between 2012 and 2022, the UAE’s influx of investment-to-GDP has been nearly 3.5 times greater than that of Saudi Arabia, and Dubai has become the favored location for some 70 percent of Middle Eastern headquarters of major multinational companies. Meanwhile, the surge in oil prices in 2022, thanks to the Russian invasion of Ukraine, propelled the Saudi economy to grow by 8.7 percent, the highest among G-20 countries, which has produced its own substantial influx of capital. And Saudi Arabia has actively encouraged foreign companies operating in the Persian Gulf area to relocate their headquarters to its territory, issuing warnings that companies failing to relocate their headquarters risk discontinuation of business relations with Riyadh.

Energy politics between Saudi Arabia (the world’s largest oil exporter) and the UAE (the fifth-largest) has further intensified this competition. In the summer of 2021, a clear dispute emerged between Riyadh and Abu Dhabi regarding a Saudi-led plan within OPEC+ to prolong production cuts, with the UAE rejecting the proposition. Although an apparent resolution to this tension was quickly achieved, subsequent rumors circulated regarding Abu Dhabi’s objection to Riyadh’s dominance within OPEC+ and the potential consideration of withdrawal from OPEC.

The competition for global prestige has also driven a wedge between Saudi Arabia and the UAE. Both countries are strategically investing in efforts to augment their soft power by hosting prominent international gatherings. Saudi Arabia has established the Future Investment Initiative conference, while Abu Dhabi has played host to the World Investment Forum, an annual event organized by the United Nations. Both forums and conferences serve as platforms to convene global leaders and investors, facilitating the proposal of innovative solutions to global challenges. After the UAE convened Expo 2020 in Dubai, the first of its kind in the Middle East, Saudi Arabia made history by securing the rights to host Expo 2030. Furthermore, Dubai was chosen as the venue for the pivotal annual U.N. climate change conference last year. This commitment to summit hosting continues, with Abu Dhabi set to host the World Trade Organization ministerial conference in February. Following Qatar’s successful hosting of the 2022 FIFA World Cup, Riyadh has undertaken initiatives to elevate the profile of its national soccer league by attracting elite players. Since early 2021, Saudi Arabia has committed a minimum of $6.3 billion in sports agreements, surpassing the total expenditure of the preceding six years by more than fourfold. It could be the first manifestation of the geopolitics of soccer in the new era. Dubai has been recognized for its relatively open, cosmopolitan society, attracting celebrities to host concerts and performances. This privilege, however, is no longer exclusive to the UAE. In December 2023, Riyadh successfully hosted MDLBEAST Soundstorm, marking the largest music festival in the Middle East. Collectively, these endeavors reflect the deliberate efforts made by these two countries to reshape their international image and promote positive perceptions of themselves on the global stage.

The last and the most pivotal competition pertains to the “vision” strategies pursued by the two countries. The UAE, having embarked on its diversification journey years ago, has established itself as a global transportation and business hub through strategic initiatives related to the ports of Khalifa and Jebel Ali, complemented by the success of its air carrier Emirates. Nevertheless, Mohammed bin Salman launched Vision 2030, an ambitious road map for Saudi economic diversification, in 2016. The flagship project within this vision is the NEOM initiative, a multibillion-dollar endeavor aimed at positioning Saudi Arabia as the preeminent infrastructure, transportation, technology, business, and financial hub in the region. Riyadh has also committed more than $100 billion to transform itself into a sea and air logistics hub, marked by the initiation of Riyadh Air. This involves challenging the dominance of Emirati ports through substantial investments in the Jeddah Islamic Seaport, slated to become the largest and busiest port in the Middle East and North Africa region. Phrased differently, the “vision” competition has propelled Riyadh and Abu Dhabi into a modernization and diversification race, often at the expense of each other.

Interestingly, rapprochement with Iran might intensify this competition. The Beijing-led detente between Tehran and Riyadh has effectively eliminated the primary shared threat in the region for Saudi Arabia and the UAE, thereby reducing the long-standing geopolitical conflicts between the northern and southern parts of the Persian Gulf. Moving forward, the region may enter a new era where the focus shifts from geopolitical competition between Iran and the GCC to geoeconomic competition between Saudi Arabia and the UAE.

Both countries are also adopting trade policies that amount to direct challenges to each other. In July 2021, Saudi Arabia implemented protectionist policies to bolster its local industrial production. These regulations stipulate that goods manufactured in free zones or utilizing Israeli inputs are excluded from preferential tariff concessions. This stance directly challenges the economic free zones that constitute a cornerstone of the Emirati economy. These regulations, designed to attract foreign investors to establish businesses within the country, stand as a clear rebuttal to the growing trade relations between the UAE and Israel.

Policy toward Israel is another potential terrain for divergence. While the UAE officially recognized Israel in 2020, Saudi Arabia has refrained so far from joining the Abraham Accords. Israel and the UAE strengthened bilateral relations by signing a comprehensive economic partnership agreement. This economic progress put Riyadh in a comparatively vulnerable position. The Israel-Hamas war has now decelerated the Saudi-Israeli normalization process; however, the dialogues will likely revive as Riyadh is supposed to be the cornerstone of the accords. It would not be surprising if Mohammed bin Salman sought additional concessions, particularly in nuclear programs and security guarantees, to normalize relations with Israel; such a move could then exert pressure on Mohamed bin Zayed’s Israel policy.

As the rift between Saudis and Emiratis widens, there is a likelihood that their improving relations with Moscow, Beijing, and even Iran may accelerate as a counterweight to each other. This, in turn, could weaken the effectiveness of the U.S. strategy in the Middle East and prompt a reevaluation by the White House of the region’s significance. Within this context, the alignment of Abu Dhabi and Riyadh with U.S. policies in the region should not be taken for granted. Just like the outbreak of the Israel-Hamas war, the rising geoeconomic competition between Saudi Arabia and the UAE could challenge the simplistic view that the Middle East is destined to become more peaceful.