Title: Resilience Amid Rivalry: The Persistence of Saudi-UAE Trade Ties Despite Strategic Divergence in Yemen
Abstract
This paper examines the resilience of economic relations between Saudi Arabia and the United Arab Emirates (UAE), particularly in the context of escalating tensions over their divergent policies in southern Yemen. Despite public friction, strategic competition, and differing geopolitical agendas, bilateral trade between the two Gulf powerhouses reached an estimated $30 billion in 2025 — a figure that underscores deep structural interdependence in trade, investment, and logistics. Drawing on policy analysis, economic data, and expert commentary, this study argues that economic pragmatism outweighs political rivalry in the Gulf Cooperation Council (GCC) core. The paper analyzes the mechanisms of integration—including energy diversification strategies, cross-border infrastructure projects, financial investments, and shared private-sector interests—to explain why a trade rupture akin to the 2017 Qatar blockade is unlikely. It further situates the Saudi-UAE relationship within a broader shift toward “business-first” foreign policy frameworks in the Gulf, with significant implications for regional stability, economic integration, and future alliance formations.
- Introduction
In early January 2026, renewed conflict in southern Yemen exposed deep fractures between two of the Gulf’s most influential actors: Saudi Arabia and the United Arab Emirates. While both nations have been key members of the coalition supporting the internationally recognized government against the Houthi movement since 2015, their respective visions for post-conflict Yemen—and the actors they back on the ground—have diverged significantly. The UAE has cultivated strong ties with the Southern Transitional Council (STC), a separatist force seeking autonomy for southern Yemen, while Saudi Arabia supports a unified Yemeni state under President Rashad al-Alimi.
Yet, amid these high-stakes geopolitical disagreements, a striking anomaly persists: the strength of Saudi-UAE economic ties remains undiminished. Bilateral trade continues to flourish, joint infrastructure initiatives advance, and capital flows unimpeded across borders. This paper investigates this paradox—why strategic competition has not translated into economic decoupling—by analyzing the institutional, economic, and strategic underpinnings of the Saudi-UAE economic partnership.
The central argument is that economic interdependence, institutionalized cooperation, and leadership prioritization of economic diversification goals have created a firewall separating commerce from diplomacy. In contrast to the 2017 Qatar boycott—a precedent-defining crisis—neither Riyadh nor Abu Dhabi can afford economic confrontation without jeopardizing their long-term national development agendas.
- Historical Context: From Coalition Allies to Competing Visions in Yemen
2.1 The Yemen Conflict and Gulf Coalition Fractures
Since 2015, Saudi Arabia and the UAE have led a military coalition intervening in Yemen’s civil war to counter what both describe as Iranian-backed Houthi expansionism. However, their operational mandates and local alliances have increasingly diverged:
Saudi Arabia: Emphasizes restoring the unity of the Yemeni state and maintaining a central government aligned with Riyadh.
United Arab Emirates: Shifted toward indirect influence by building relationships with local militias such as the STC and tribal leaders in Aden, Socotra, and Hadhramaut.
By 2024, the UAE had largely withdrawn its formal military presence but maintained extensive soft power through funding, training, and port management (e.g., Aden Port, Mukalla). Meanwhile, Saudi Arabia intensified its diplomatic efforts through UN-led peace processes and cross-border humanitarian initiatives.
This divergence culminated in open friction in late 2025 when Emirati-supported STC forces clashed with Saudi-backed Yemeni Presidential Leadership Council units in Abyan Governorate, raising fears of intra-coalition warfare (Al Jazeera, 2025).
2.2 Precedent: The Qatar Blockade of 2017
The most salient historical comparator is the 2017–2021 blockade of Qatar by Saudi Arabia, the UAE, Bahrain, and Egypt. That crisis demonstrated that political disputes could rapidly escalate into full-scale economic isolation:
Air, sea, and land routes were severed.
Qatari airliners were banned from GCC airspace.
Investments were withdrawn, and diplomatic ties were cut for over three years.
However, Qatar’s economy was less integrated with its neighbors, allowing it to pivot quickly to Turkey, Iran, and Western markets. Moreover, Qatar’s smaller size and hydrocarbon-based export model made economic disengagement feasible for the blockading states—at least in the short term.
In contrast, Saudi Arabia and the UAE are systemically interconnected, with trade volumes, supply chains, and investment portfolios deeply engrained in one another’s economies.
- Pillars of Economic Resilience
3.1 Bilateral Trade and Investment Landscape
According to the UAE Ministry of Economy (2026), total non-oil and oil-related trade between the UAE and Saudi Arabia reached $29.7 billion in 2025, up from $24.1 billion in 2020. Key sectors include:
Construction materials and machinery: UAE exports cement, steel, and heavy equipment vital for Saudi Vision 2030 megaprojects (e.g., NEOM, Qiddiya).
Consumer goods and foodstuffs: The UAE serves as a re-export hub for global brands entering Saudi Arabia via Jebel Ali and Khalifa Ports.
Financial services and fintech: UAE-based banks (e.g., Emirates NBD, Mashreq) have expanded into Riyadh and Jeddah, while Saudi firms like Al Rajhi Bank and STC Pay operate in Dubai.
Moreover, Saudi investment in the UAE exceeds $120 billion, predominantly in real estate (Dubai Marina, Palm Jumeirah), technology startups, and hospitality (Knight Frank, 2025). Conversely, UAE sovereign wealth funds—including Mubadala and ADQ—have committed over $70 billion to Saudi ventures, especially in renewable energy, logistics, and giga-projects.
3.2 Logistics and Infrastructure Integration
One of the most telling indicators of integration is infrastructure interdependence. The UAE’s expansion of Khalifa Port in Abu Dhabi and its strategic role as a transshipment hub enable seamless connectivity with Saudi markets:
Over 40% of goods imported into Saudi Arabia from Asia and Africa are routed through UAE ports (GCC Secretariat, 2025).
The UAE operates several Saudi ports under public-private partnerships, including King Abdulaziz Port in Dammam.
Joint railway plans under discussion aim to link Fujairah (UAE) with Jubail (Saudi Arabia), enhancing dry cargo and container mobility.
As Robert Mogielnicki (2026), Senior Resident Scholar at the Arab Gulf States Institute in Washington, notes: “The UAE’s logistics dominance and Saudi Arabia’s market size create a symbiotic relationship difficult to unravel even under political duress.”
3.3 Institutional Alignment: The GCC and Beyond
Despite past rifts, both nations remain committed to GCC institutional frameworks, albeit selectively. Economic harmonization initiatives—such as the Common External Tariff, VAT alignment (5% rate adopted in both countries), and mutual recognition agreements for professional certifications—facilitate business continuity.
Additionally, bilateral coordination platforms have increased in frequency:
The Saudi-UAE Joint Economic Committee meets biannually.
The Supreme Council for Joint Projects oversees mega-developments like the “Gulf Railway” and Red Sea tourism zone cooperation.
Regulatory sandboxes allow startups from each country to test innovations in the other’s market.
These structures institutionalize cooperation, making abrupt economic disengagement politically costly and administratively complex.
- The “Business-First” Foreign Policy Doctrine
A critical shift in Gulf foreign policy since the mid-2020s has been the subordination of geopolitical competition to economic priorities. Both Mohammed bin Salman (MBS) and Mohammed bin Zayed (MBZ) view economic transformation as central to regime legitimacy and survival.
4.1 Vision 2030 and UAE Centennial 2071: Convergent Goals
Saudi Vision 2030 aims to reduce oil dependence, attract $100 billion annually in FDI, and build a diversified economy.
UAE Centennial 2071 focuses on knowledge economy development, innovation, and global trade leadership.
Both strategies rely heavily on:
Foreign direct investment (FDI) – facilitated by stable regional partners.
Regional market access – enhanced by frictionless trade with neighboring GCC states.
Talent and capital mobility – encouraged by visa liberalization and shared free zones.
In this context, economic confrontation with the UAE would undermine Saudi Arabia’s giga-projects, which depend on Emirati contractors, financiers, and expertise. Similarly, UAE logistics hubs require access to Saudi consumers and investors to maintain profitability.
4.2 Leadership-Level Pragmatism
Despite periodic media flare-ups and diplomatic snubs, personal ties between MBS and MBZ remain functional. Regular summits, intelligence sharing, and security coordination on issues like counterterrorism and energy prices reflect a deliberate effort to compartmentalize disagreements.
As noted by Kristian Coates Ulrichsen (2026), Gulf analyst at Rice University:
“MBS and MBZ may disagree on Yemen or Egypt, but they agree that economic growth is non-negotiable. Their rivalry is bounded by mutual interest in avoiding systemic disruption.”
- Why No Trade Boycott? Lessons from the Qatar Crisis
Several structural factors differentiate the current Saudi-UAE dynamic from the 2017 Qatar standoff:
Factor Qatar (2017) Saudi Arabia-UAE (2026)
Economic Size & Interdependence Small economy; limited integration Two largest GCC economies; deeply linked supply chains
Trade Volume ~$7 billion pre-boycott ~$30 billion annually
Private Sector Exposure Low cross-investment High mutual investment; shared corporate boards
Strategic Assets LNG exports easily rerouted Shared ports, rail plans, financial systems
Leadership Priorities Political isolation possible Vision 2030 vs Centennial 2071 require cooperation
Furthermore, GCC leaders now perceive the Qatar blockade as counterproductive. It strengthened Qatar’s independence, damaged global perceptions of Gulf unity, and disrupted regional supply chains. As a result, there is little appetite for repeating such a strategy—especially when the involved parties are far more economically entangled.
- Limits of Cooperation: Areas of Friction
While economic ties remain robust, political and security competition continues in several domains:
6.1 Influence in Yemen
UAE supports STC’s push for self-determination.
Saudi Arabia backs central government institutions and opposes secession.
6.2 Media and Public Diplomacy
State-affiliated media outlets occasionally publish hostile commentary (e.g., Al Arabiya vs Sky News Arabia).
Social media campaigns sometimes amplify anti-Saudi or anti-Emirati narratives.
6.3 Global Alliances
UAE has diversified partnerships with China, India, and Israel (via Abraham Accords).
Saudi Arabia maintains stronger U.S. defense ties and is pursuing rapprochement with Iran.
Nevertheless, these divergences are managed within established diplomatic channels and do not spill over into trade or investment policy.
- Implications for Regional Stability and Economic Integration
The resilience of Saudi-UAE trade offers several insights:
Economic integration can act as a stabilizing force in geopolitically volatile regions.
Rising interdependence reduces the utility of coercive economic tools like boycotts among peer powers.
National development visions are becoming primary drivers of foreign policy, surpassing ideological or sectarian alignments.
Looking ahead, the Gulf may be transitioning toward a multipolar balance of power, where competition coexists with collaboration—a “co-opetition” model similar to U.S.-China dynamics in certain domains.
- Conclusion
The persistence of $30 billion in annual trade between Saudi Arabia and the UAE despite ongoing tensions in Yemen illustrates a fundamental transformation in Gulf statecraft. No longer are political alliances monolithic or economic partnerships contingent exclusively on diplomatic harmony. Instead, a new paradigm has emerged—one where economic imperatives take precedence over political disputes.
The deep entanglement of logistics networks, financial systems, and strategic development goals creates powerful incentives for restraint. Neither Saudi Arabia nor the UAE can afford a breakdown in relations without risking their flagship economic programs. As Robert Mogielnicki observes, “Foreign policy is increasingly a tool to support business—not the other way around.”
While differences over Yemen and other regional issues will likely persist, the firewall protecting commercial interests appears solid. Unless a direct threat to core sovereignty emerges, the trajectory points toward managed rivalry with sustained economic integration.
For scholars and policymakers, the Saudi-UAE case underscores the importance of distinguishing between political rhetoric and economic reality in assessing Gulf dynamics. It also highlights the growing role of economic statecraft as the defining feature of 21st-century Gulf geopolitics.
References
Al Jazeera. (2025). Clashes Erupt Between STC and Yemeni Government Forces in Abyan. [Online] Available at: https://www.aljazeera.com
Arab Gulf States Institute in Washington (AGSIW). (2026). Saudi-UAE Trade and Investment Report 2025. Washington, DC.
BBC Monitoring. (2025). GCC Economic Integration: Progress and Challenges. London: BBC.
Economist Intelligence Unit (EIU). (2026). Country Reports: Saudi Arabia and UAE. London: EIU.
Knight Frank LLP. (2025). Wealth Report: Arabian Peninsula Edition. Dubai: Knight Frank.
Mogielnicki, R. (2026). “Economic Statecraft in the Gulf: The Primacy of Trade over Tension.” AGSIW Policy Brief, January 2026.
Gulf Cooperation Council Secretariat. (2025). Annual Report on Regional Trade Flows. Riyadh: GCC.
Ulrichsen, K.C. (2026). The Changing Gulf: Politics, Economics, and Security After the Blockade. Oxford University Press.
Reuters. (January 7, 2026). Explainer – Why Saudi-UAE trade ties remain resilient despite Yemen tensions. Abu Dhabi.