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Trade between Israel and the United Arab Emirates (UAE) topped US$1.1bn during the first full year that the countries have enjoyed diplomatic relations, according to Israeli statistics, but Israel’s trade with Bahrain and Morocco remains modest.

Israel imported US$771.5mn-worth of goods from the UAE in 2021, a massive jump from the US$114.9mn recorded in 2020, data from Israel’s Central Bureau of Statistics (CBS) show. The UAE received US$383.2mn in Israeli imports during the same period.

The two countries are the Middle East’s biggest diamond hubs and the gem accounted for US$331.7mn-worth of Israel’s exports to the UAE and just over two thirds of its imports.

Israel and the UAE signed agreements establishing diplomatic ties in September 2020. The UAE, like most majority Muslim nations, had until then refused to recognise Israel because of its occupation of the Palestinian Territories, a position that melted away as their mutual enmity toward Iran drew the two governments closer.

The US-brokered agreements, known as the Abraham Accords, also included Bahrain and were later expanded to include Morocco. Sudan agreed to recognise Israel last year, in return for the US removing its economic sanctions. The three countries had similarly refused to recognise Israel in the past.

Israel’s trade with Bahrain and Morocco has not accelerated to the same degree. Total goods trade between Israel and Bahrain amounted to US$6.5mn last year, after none was recorded in 2020 and 2019, according to the figures. Goods trade with Morocco was US$41.6mn, with Israeli exports growing by just over half compared to 2020, and flows in the opposite direction remaining steady.

The CBS data is publicly available but has not previously been reported. Sudan is not included in the available statistics. The figures are only for goods trade and do not include government-to-government transactions, services or defence deals.

In 2017, the Tony Blair Institute for Global Change estimated that Israeli exports to the Gulf states were close to US$1bn, and could be worth as much as US$15-20bn if trading relationships were normalised.

Israel has long traded with countries with which it has no formal relations, such as Saudi Arabia, Malaysia and Indonesia. This trade was conducted via third countries and captured in official data as trade with states such as Cyprus, Jordan and Turkey.

The UAE and Israel signed a free trade agreement on April 1 this year that will exempt around 95% of products traded between the two from customs duties, according to the Israeli government. The deal still needs to be ratified in Jerusalem and Abu Dhabi.

UAE Emirates Minister of State for Foreign Trade Thani Al Zeyoudi said that “this milestone deal will build on the historic Abraham Accords and cement one of the world’s most important and promising emerging trading relationships”. The deal was clinched after just five months of negotiations.

Morocco and Israel signed a trade and economic co-operation deal in February, seeking to simplify and boost the value of trade between the two to US$500mn in the next five years.

 

Accords lift Mena trade

Trade between Israel and two other Arab countries with which it has diplomatic relations, Egypt and Jordan, also grew during 2021. Israel signed peace agreements with the two countries in 1979 and 1994 respectively, but relations remained frosty and trade depressed.

Total trade between Egypt and Israel in 2021 was US$246.1mn, up from US$179.9mn the previous year. Jordanian exports to Israel nearly doubled in 2021 to US$391mn, although trade in the opposite direction remained muted.

The uptick in Israel’s trade with Egypt and Jordan could be because the Abraham Accords gave other Arab countries more cover to trade openly with Israel, thanks to the political clout of the UAE in particular, according to Dorian Barak, co-founder of the UAE-Israel Business Council.

The accords “made it more palatable for Israeli companies to operate in the Arab world”, Barak tells GTR. “Those are what they call the dividends of peace.”

Barak says that the UAE is likely to become an operations hub for Israeli companies trading with countries such as India, Saudi Arabia and Iraq, or even as far afield as China.

His group projects total Israel-UAE trade to grow by about US$1bn annually over the next two years, with plenty of scope for growth in sectors such as pharmaceuticals, renewable energy, agriculture and tech.

Despite the rapprochement between some Gulf capitals and Israel in recent years, public resentment toward Israel and sympathy with the Palestinian cause remains widespread. Attempts by Qatar – which has not joined the Abraham Accords – and Israel to foster trading ties in the 1990s and 2000s came undone when the Israeli-Palestinian conflict flared.

However the UAE and Bahrain stuck by the relationship when war broke out between Israel and militants in Gaza in May last year, in which more than 250 Palestinian civilians were killed, according to the UN.

Saudi Arabia, one of the Middle East’s biggest economies and a regional heavyweight, has so far stopped short of formalising its warming relations with Israel. Oman, which has hosted former Israeli Prime Minister Benjamin Netanyahu, has said it is happy with the current status of its relationship with Israel, which does not include formal recognition.