- The United Arab Emirates has long been the economic jewel of the Middle East.
- That reputation is now under threat.
Before Mohammed bin Salman became the de facto leader of Saudi Arabia, the 38-year-old was once an obscure young prince whose coming influence on the global stage was unapparent. An Emirati helped change that.
As he drew attention at home as an ambitious royal in the mid-2010s, becoming defense minister before the age of 30, it was United Arab Emirates President Sheikh Mohamed bin Zayed Al Nahyan who helped the Saudi prince's name reverberate in the West.
"MBZ was basically telling Obama, 'You've got to pay attention to this young prince because he will be a future king of Saudi Arabia' — when at the time, nobody had really heard of him," Kristian Ulrichsen, a Middle East fellow at Rice University's Baker Institute, said, referring to Sheikh Mohamed.
By giving Crown Prince Mohammed credibility from Washington to London, Sheikh Mohamed, now 62, began to foster a close relationship with the future leader of the biggest economy in the Middle East.
That relationship is now fraught.
The stratospheric rise of Saudi Crown Prince Mohammed in recent years has created a turbulent relationship between him and Sheikh Mohamed — a man considered by many to have been his mentor — as the crown prince's unrelenting pursuit of glory has threatened to sow deep discord between neighboring states.
How the UAE and Saudi Arabia navigate their growing tensions is crucial: The consequences of an escalating rivalry threaten to ripple far beyond the Persian Gulf.
A history fraught with conflict
While the crown prince and the UAE president started out as close allies, the rivalry between their two nations has deep roots.
In the 1950s, a three-year territorial battle known as the Buraimi dispute saw the Saudis attempt to wrestle an oil-rich oasis around the city of Al Ain into their possession, sparking furor in the UAE — then part of what was known as the Trucial States.
In the '70s, when the British completed their withdrawal from the Gulf in the twilight of their empire, a settlement that established borders between the UAE and Saudi Arabia later left the Emiratis feeling cheated as a huge oil field known as Shaybah went to the Saudis.
Ulrichsen said Sheikh Zayed bin Sultan Al Nahyan, the UAE's founder and former president, was believed to have spent "the rest of his life" feeling "he had been tricked by the Saudis" into giving up this resource-rich area.
Fast-forward to the 2000s, and battles seemed to spill into all arenas — naval standoffs, disputes over a gas pipeline from Qatar, and fallout over a proposed common currency in the Gulf came to define the relationship between the two nations.
It wasn't until the Arab Spring that the competing nations found significant common ground.
"Both the UAE and Saudi, especially Abu Dhabi, felt that Qatar was supporting different groups, and they aligned against Qatar, and this brought them onto the same page," Ulrichsen said.
A new battle for Gulf supremacy
It was only a matter of time before sparks would fly again: The two states are battling to determine which will be the region's superpower.
"These are two countries increasingly eyeing each other in a hostile way for geo-economic purposes and are going to be at odds with one another on an array of issues," Abishur Prakash, the founder of the Geopolitical Business, an advisory firm, said.
On an economic front, the UAE has had a huge head start with Dubai, which has consistently been a destination for young Saudis and others seeking jobs not available at home, as well as foreign direct investment from global businesses looking for a gateway to the Middle East.
That advantage is now threatened by Vision 2030 — the crown prince's radical transformation plan to future-proof Saudi Arabia's economy by reducing its dependence on oil. Its scope is enormous.
Along with "gigaprojects" such as The Line — a 100-mile-long glass structure on the cusp of the Red Sea envisioned as a car-free, futuristic city for 9 million people — Vision 2030 is targeting entertainment, hospitality, and travel as growth areas for the country.
These sectors, of course, are central to the UAE's economy, making Saudi Arabia's focus on them a direct competitive threat.
"You cannot have a business hub in two neighboring countries in such close proximity," Abdullah Alaoudh, the Saudi director at the Freedom Initiative, a US human-rights organization, said. "Sometimes their influence or their interests, actually, do not see eye to eye."
Recent developments have made this direct competition clearer than ever. In March, Saudi Arabia unveiled Riyadh Air, a new airline serving as an alternative to the UAE's Emirates and Etihad Airways.
In 2021, the Saudi Public Investment Fund completed its $400 million takeover of Newcastle United FC, giving it ownership of a sports club that would directly compete in the English Premier League against the Abu Dhabi-owned Manchester City.
Saudi Arabia is also upping the ante as it prepares to introduce regulations that go into effect on January 1 barring foreign companies from operating in the country unless their regional headquarters is also there. Several firms have their bases in the UAE.
"A move like that fundamentally redesigns the relationship between the UAE and Saudi Arabia," Prakash said. "You're telling the world to pick sides. If you want to do business with Saudi Arabia or Saudi state-owned entities, you've got to base your regional HQ in Saudi Arabia."
Political tensions threaten to boil over
Experts say Crown Prince Mohammed's full-blooded political ambitions have made relations between the UAE and Saudi Arabia a real high-wire act, too.
The anti-corruption purge that turned Riyadh's Ritz Carlton into a prison for elite Saudis targeted by the crown prince in 2017 sparked alarm as the consequences of unbridled ambition from the leader presented a huge uncertainty.
The murder of the journalist Jamal Khashoggi at the Saudi consulate in Istanbul in 2018 — which an intelligence report released by the Biden administration in 2021 concluded had been approved by the Saudi crown prince — presented a similar uncertainty.
"I think there was a concern that MBS seemed to have no limits over his actions," the Baker Institute's Ulrichsen said. "It was almost a wake-up call to some people in Abu Dhabi, like, 'What's next?'"
The UAE and Saudi Arabia have been sparring well beyond their own borders, too. A critical flash point has been Yemen, where the UAE formed a part of the Saudi-led intervention into the country torn by civil war in March 2015. The two are now on opposing sides.
As the war has descended into a full-blown humanitarian crisis following periods of intense airstrikes and targeting of Iran-backed Houthi rebels, the Saudis have sided with the Yemeni government, while the UAE has backed an opposing secessionist group in the south.
"For Saudi Arabia, this is a very dangerous game," Alaoudh said. "Saudi Arabia sees the separation project in Yemen as a way to let the Houthis control the north and therefore have a more-threatening border at the south of Saudi Arabia."
The ball is in Saudi Arabia's court
How far the rivalry between the two nations goes largely depends on Saudi Arabia's actions. While a Qatar-style blockade is unlikely, experts told Insider, Saudi Arabia may look to push the UAE by getting the upper hand economically.
Both are members of the oil cartel OPEC+ but have opposite stances on oil production. Saudi Arabia is seeking to reduce production as crude nears $100 a barrel; the UAE said in July it wouldn't make further voluntary production cuts.
Prakash added that much of this now came down to the crown prince's ability to deliver on the central promises of Vision 2030.
"Is Saudi Arabia posing a threat today to the UAE? No, because the projects Saudi Arabia is working on are not finished yet," he said. "The Line is an incredible project, but once it's built, will people come? That's the million-dollar question."
Evidence also suggests some promises may not be kept. During a press conference in 2016, the same year the Vision 2030 project was announced, the crown prince made the bold claim that Saudi Arabia "can live without oil" by 2020.
Three years have passed, and the state-owned oil company Saudi Aramco generated record profits of $161 billion in 2022, with Saudi Arabia's role as the world's top oil exporter boosted by the Ukraine war.
"We're almost going to finish the year 2023, and Saudi Arabia is more dependent on oil than ever," Alaoudh said.
The foreign investment needed for Vision 2030 has also been slow to arrive. Figures published in July by the United Nations showed that Saudi Arabia's foreign direct investment dropped almost 60% to $7.9 billion last year, but the figure for the UAE rose by 10% to $23 billion.
Ulrichsen said this reflected the fallout from the Ritz Carlton siege, which spooked overseas investors: "Foreign-investment levels collapsed after that, partly because investors were thinking, 'Well what happens if our business partner suddenly gets detained?'"
That said, there is still a possibility of Saudi Arabia pulling off a generational transformation. What that could mean for the UAE, Prakash said, is "more competition, more clashing."