It seems that among several scenarios from the perspective of Iran and the UAE, growing relationships without returning to severe tensions is the most likely scenario.

Iran-UAE relations

In January 2016, with the attack on the Saudi embassy in Tehran, the UAE reduced its diplomatic relations with Iran. The UAE tried to de-escalate tension with Iran by sending a delegation after May 2019. The government of Iran’s then president, Ebrahim Raisi, tried to take a big leap in expanding relations with the UAE.

In 2021-2024, relations improved slowly after the renewed conversation, the visit of Sheikh Tahnoon bin Zayed Al Nahyan of the United Arab Emirates to Iran in December 2021, the calls between the two side’s political officials for the resumption of relations between Saudi Arabia and Iran, and the visit of the head of Iran’s Supreme National Security Council to Abu Dhabi, in 2023, the establishment of ambassadors, the expansion of meetings between officials and ministers, the official invitation of the President of Iran to his Emirati counterpart to visit Tehran, the visit of the Speaker of the Iranian Parliament to the UAE, and the freedom of 10 Iranian citizens.

In addition to political and security issues, the reasons for the change in the UAE’s attitude towards Iran compared to 2016 to 2019 should also be sought in the economic conditions of this country and the change in approach.

In the past year, apart from numerous meetings of political and economic officials, the UAE and Iran held the 10th meeting of the joint consular committee of the two countries to promote and strengthen their overall cooperation in consular affairs.

In recent months, due to the formation of the new government in Iran, the process of developing relations between Iran and the UAE has continued. Apart from the congratulatory message of the President of the UAE on the occasion of the election of Masoud Pezeshkian and welcoming any thoughts and ideas for the development of relations between the two countries in all fields, the Minister of Foreign Affairs of the UAE met with the new President. In this meeting, Pezeshkian said that deepening and strengthening relations with neighbours is the main policy of the Islamic Republic of Iran.

From the point of view of Pezeshkian, the strengthening of relations between Tehran and Abu Dhabi should lead to real unity and cohesion between Islamic countries, and the Minister of Foreign Affairs of the UAE announced that he is open to the development of relations with Iran at all levels.

Tehran recently emphasized on the continuation of the neighbourhood policy as a priority in Iran’s foreign policy to solve regional problems based on interaction and cooperation with its neighbours.

For Tehran, the normalization of supporting relations is to distance the UAE from “Arab NATO” and alliance with Israel, reduce the US presence in the Middle East and strengthen Iran’s geopolitical position in the region. On the other hand, it seems that the policy of the UAE is slowly moving towards a policy of positive balancing between world powers.

In fact, with the reduction of America’s role in the Middle East in recent years, the strengthening of relations with Iran has provided assistance to Abu Dhabi in the UAE’s strategy of accessing the vision and movement in the multipolar world order and participating in BRICS.

Also, apart from Abu Dhabi’s approach to avoid the tensions between the United States, Israel, and Iran, the UAE has prevented Western-oriented attacks from the UAE against Iranian-aligned groups in the region and is not eager to participate in regional or international anti-Iran coalitions.

Opportunities

In fact, despite some long tensions, the relationship around pragmatism and economic interests and finding common ground is expanding.  Also, conditions and coordination such as the reduction of restrictions, the activity of new companies, examining the areas of cooperation between private sectors, facilitating the issuance of visas, creating new cooperation mechanisms, new mechanisms for financing trade exchanges, the agreement of March 2023 to facilitate trade using the unit Emirati currency (dirhams), the start of Iran’s Hybrid Trade Center, and the expansion of the role of the Iran and UAE Chamber of Commerce have created many economic opportunities.

With their oil and gas reserves, Iran and the UAE can strengthen cooperation in OPEC and the petrochemical sector and gain access to benefits such as market control and securing benefits and re-exports. The UAE has played an important role in Iran’s oil exports since 2019. Iran needs an extensive investment of 200 billion in the fields of oil, gas, electricity, and petrochemicals by 2026, and the presence of powerful financial funds and important UAE companies in Iran can be a win-win.

There is also an increase in cooperation in the field of solar energy and renewable energy production, joint exploration and production of oil and gas, infrastructure development, and energy-oriented multilateral cooperation.

UAE and Iran also have much potential in the field of food security cooperation and promotion of the food and agriculture sector. Despite the transit cooperation and the important role of the UAE in the export and import of Iran, the strengthening of port, maritime, and transit cooperation and the direct container shipping line, and the experience of the UAE in ports can help Iran.

In the last year, the two countries paid more attention to increasing business and tourism opportunities with the signing of an agreement on the regulation of air transport to organize air transport flights between the two countries and the development of maritime transport. Plans such as the submarine tunnel in the Strait of Hormuz, better and more regular maritime communication, and shipping lines for the transfer of goods from Iran to the UAE continues to create opportunities in the future.

With the UAE becoming a logistics hub between Africa, Europe, and Asia and Iran’s role at the center of the intersection of corridors, bilateral and multilateral cooperation in projects such as the North-South Corridor (INSTC) and the Emirates-Iran-Turkey transit corridor can be a win-win. The recent joint economic commission of the two countries focused on the INSTC for the transit of UAE cargoes to Central Asia and the Caucasus and Russia, port cooperation, and investment in Chabahar port.

The positive influence and role of the Iranian diaspora living in the UAE (nearly 500,000 Iranians, 8-10 thousand Iranian companies in Dubai, and more than 200 billion dollars of investment) can play an important role in strengthening bilateral trade, diversifying the economy and reducing Oil, expansion of tourism for two countries.

In addition, there are opportunities regarding cooperation in the field of foreign investment, avoiding double taxation and facilitating mutual investment, and direct investment of the UAE in Iran can lead to the development of relations between the two countries in all fields. There is a possibility of cooperation between Iran and the UAE in dealing with global warming, climate crisis, sea level rise, frequent dust and sand storms, and destruction of marine ecosystems.

Last year, the bilateral trade between Iran and the UAE was 27 billion dollars, with an increase of 25%. The UAE is Iran’s largest trading partner after China. After 10 years since the last Joint Economic Commission, the two countries, during the Joint Economic Commission in May 2024 in Abu Dhabi, predicted $30 billion in trade and signed 22 cooperation documents.

Also, apart from signing 2 memorandums of understanding on the establishment of the commission and economic cooperation, they discussed and exchanged opinions on various programs including trade, tourism, transit, banking, technology, energy, port, and aviation relations.

Challenges

An important part of the previous lack of growth in the volume of trade between the two countries should be found in the political differences between the two countries over regional issues and the concerns of the UAE. Also, there are problems in the legal and infrastructural fields, increasing costs, and US sanctions against Iran.

Challenges such as banking restrictions, legal and operational uncertainties, FATF issues, and the upcoming elections in the United States can stop Emirati investors in Iran. Also, there is still a lack of trust between Abu Dhabi and Tehran. Abu Dhabi is concerned about Iran’s relationship with other actors in the “Axis of Resistance”.

In addition, the territorial dispute between the UAE and Iran over three Iranian islands in the Persian Gulf and near the Strait of Hormuz – Big and Small Tunb and Abu Musa – sometimes fuels the dispute. The UAE’s approach is direct negotiations or referring the case to the International Court of Justice, but Iran considers the three islands an inseparable and eternal part of Iran’s territory and considers any comments related to the Iranian islands to be interference in its affairs.

In addition, there is a different attitude towards developments in the Middle East and relations with Israel, while many in Tehran believe that Israel’s presence in the UAE is for security and military purposes and a threat to Tehran. Also, there is still a different view of the UAE’s artificial islands.

Prospects

The economies of the two countries complement each other due to their close geographic location. An increase in cooperation and investment in sectors and activities related to tourism, trade, energy, and industry is predictable. Despite these vision plans, investment and the future of economic and commercial relations also depend on the future of political relations. Therefore, it is quite possible to expect the expansion of trade to more than 30 billion dollars.

It is unlikely that the dispute will lead to severe tensions with more meetings, talks, and government visits. The opportunities are wide and there is no permanent enemy in foreign policy. Iran and the UEA are still suspicious of each other. It seems that among several scenarios from the perspective of Iran and the UAE, growing relationships without returning to severe tensions is the most likely scenario.

Farzad Bonesh ? geopolitical and geoeconomic analyst, researcher and writer, exclusively for the online magazine “New Eastern Outlook.” Courtesy

https://journal-neo.su/2024/10/05/iran-uae-relations-opportunities-and-challenges-perspective/