Thanks to the peace deal between their countries, they can now do so out in the open

ISRAEL AND the United Arab Emirates (UAE) have maintained unofficial relations for a while, despite a half-century boycott in much of the Arab world of the Jewish state in its midst. So, too, with commercial ties. Goods moved between the two economies, but only passing through intermediaries in third countries first. This made sense for high-margin products like technology, an Israeli forte, or diamonds, where the rigmarole could tack on a week’s delay and a surcharge of 1% for extra bank fees and insurance. Trade was pointless for most other businesses.

No longer. On January 24th Israel opened an embassy in Abu Dhabi, the UAE’s capital, as part of the Abraham accords, a peace deal brokered by America and signed last September. The outpost has symbolic value, of course. It is also a beachhead for Israeli and Emirati bosses and investors keen on doing business with their counterparts. And there is plenty of business to be done “now that the relations between the two countries have come out into the open”, says David Meidan, a former senior spy at Mossad, Israel’s spy agency, who advises Israeli companies operating in the Arab world. Boosters talk of up to $6.5bn in annual bilateral trade—equivalent to 5% of Israel’s current tally and 1% of the UAE’s—within a few years, and billions more in investments.

In the past six months Frost & Sullivan, a consultancy, has been pitching deals with its Israeli clients to Emirati firms in industries from carmaking to food. Until November half rejected the advances out of hand. Now only a third do, says Subhash Joshi, head of Frost & Sullivan’s Middle East practice in Dubai. He expects the share to keep falling. On February 7th and 8th Abu Dhabi will host a high-profile UAE-Israel investment summit.

Signs of a commercial love-in abound. Two port operators, Israel Shipyards and Dubai’s DP World, are planning a joint bid for Israel’s newly privatised Haifa Port. The Barakat Group, the UAE’s largest fresh produce importer, began to offer crates from Israel to the Emirati hotels and street markets it supplies. Barakat’s managing director, Kenneth D’Costa, praises Israeli avocados, which he expects to take market share from pricier European fruit and poorer-quality Kenyan ones.

That is just the start. Spending by Emirati farmers on Israeli agricultural kit, seeds and know-how (responsible for those avocados) is expected to balloon, especially as the UAE tries to decrease its reliance on foreign food, 80% of which is currently imported. Israel, for its part, will gain access to Emirati oil and gas, petrochemicals, building materials and other bulky goods, where thin margins made circuitous channels unprofitable. A recent study by the chambers of commerce of Dubai and Israel identified “potential” for Emirati exports of cement, ceramics and metals, which Israel now imports from farther afield at a higher cost.

Direct travel between the two countries will also boost business. Before the latest covid-19 lockdown as many as 25 flights a week ferried travellers between Tel Aviv and Dubai, up from none before the accords. In December alone more than 40,000 Israelis flew to Dubai. Israeli-passport holders are at last able to get on the ground in the UAE to drum up investment for Israel’s tech-startup scene, says Sharon Daniel, a venture capitalist in Tel Aviv.

The Emiratis understand the Arab region “much better than we do”, says Erel Margalit of Jerusalem Venture Partners, a big venture-capital firm. They are also a gateway to the Far East, Mr Margalit adds. Asaf Azulay, marketing chief of Bank Hapoalim, a big Israeli bank, likewise spies “a double opportunity”: to access the Arab world and Africa, and to invest jointly. His company has already signed co-operation agreements with two Emirati banks.

Dan Catarivas of the Manufacturers’ Association of Israel expects unfettered business travel to boost trade in sensitive areas like security software and advanced kit for health care, defence and energy production. It makes sense for the two most technologically advanced countries in the Middle East to “work together as hubs and research centres”, says Yoaz Hendel, who until recently served as Israel’s communication minister.

It isn’t all plain sailing. Emiratis, taught to view Israel as evil, need time “to absorb this new reality”, says the boss of a big Emirati food importer. He decided to steer clear of Israeli suppliers for now.

After decades of animosity some friction was inevitable. Still, signs of warming relations can be seen around Dubai—literally in the case of Hebrew signage popping up and Jews out and about in religious garb. It is “almost like everything Judaism became trendy”, says an Emirati government official. And for Israelis willing to move their domicile, adds Mr Meidan, there is the added attraction of doing business in a country with no income tax.

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