Wednesday, May 12, 2021

The April 25 Zoom presentation on the Abraham Accords, part of the Jewish Federation of Northern New Jersey’s FedTalk series, began with moderator Yehuda Kohn introducing Ze’ve Lavie, vice president of international relations for the Federation of Israeli Chambers of Commerce and a key player in Israel’s economic diplomacy. Lavie launched into details about the accords, which were signed in August 2020.

During his presentation, Lavie emphasized that the peace agreement signed between Israel and several of its neighbors would not simply open the door to bilateral trade, but would lead to, in his words, “an earthquake.” Based on his detailed description of the Abraham Accords, his comment was no exaggeration.

He explained that working with the UAE, which are actually seven separate emirates often in competition with each other, has always been complex, with many rules and barriers to entry. Each emirate has its own government, led by a sheikh, with the oil-rich Abu Dhabi and Dubai the most well-known.

The accords, though, have dramatically changed the equation. Once the agreement was signed, Israeli companies were eager to do business, largely because it was the first opportunity they had to work with a Middle Eastern country whose society was as advanced as Israel’s and as economically synergistic. In fact, Lavie displayed a graphic that showed the remarkable similarities. For instance, the population of the UAE is 9.7 million, vs. 9.1 million for Israel. GDP is $421 billion for the Gulf state, $395 for Israel. And, the unemployment rates for each are close as well, 2.2% for the UAE and 3.8% for Israel. Only in total trade and land mass does the UAE dwarf Israel, by a factor of three to four. Although Bahrain, Morocco and Sudan have also entered into the accords, the UAE is clearly the key player.

Once the agreement was signed and the barriers began to fall, there wasn’t much time for Israeli businesses to learn about the UAE and get past numerous misconceptions. For instance, Israelis thought they needed to have a connection to a sheikh or know people in one of the royal families to do business, when in fact it’s a free market society.

“The economic implications,” noted Lavie, “are much bigger than a bilateral agreement that results in rich sheikhs spending large amounts of money on Israeli goods.”

The heart of the presentation focused on the three tiers of economic potential, bilateral, regional and global. Bilateral involves tourism, trade and technology, with tourism the largest component. In fact, within the first two months of flights becoming available, more than 50,000 Israelis traveled to Dubai despite COVID concerns. The trip by air takes three to three and a half hours. The expectation is for there to be 100 flights a week between the two destinations.

The UAE is very interested in Israeli technology and how the Jewish state has successfully dealt with challenges both have faced in relation to climate change, energy, water irrigation and healthcare. Lavie noted that climate in the Gulf is more arid than in Israel, with global warming expected to result in temperatures reaching 129 degrees Fahrenheit. This has piqued the UAE’s interest in Israel’s advanced water and agricultural technologies.

On a regional level, these initial agreements can lead to accords with players such as Kuwait, Qatar and Oman and possibly what Lavie called “the crown jewel,” Saudi Arabia. He noted that the Saudi economy is larger than Israel and the UAE combined, and pointed out that given their outsized regional influence, the current normalization could not have happened without their consent. Indonesia, a Muslim powerhouse with a population exceeding 270 million, was also mentioned as a potential prized partner down the road.

The agreement will allow Israel to trade with its regional neighbors for the first time, the importance of which cannot be overstated. In the past, Israel would tag along with the United States or Europe, with neither a natural geographic fit. Lavie noted that the two largest export partners for the United States have been Canada and Mexico, while for Germany it’s been Poland. Now Israel will finally have the opportunity to be part of a natural alliance. Additionally, Dubai is a world leader in hosting exhibitions in healthcare and other disciplines. The accords will finally allow Israel access.

Lavie also pointed out that although Israel has peace agreements with its two closest neighbors, Egypt and Jordan, it has virtually no economic trade with either. That too may be changing. Since the signing of the Abraham Accords, business people from both those countries have begun to reach out, aware of how they can benefit from an economic peace.

As exciting as these opportunities appear, things get really interesting when the third tier, the global marketplace, is examined. Dubai has by far the largest port in the Middle East. It is a hub for both air and sea transport. Unlike the United States or China, it has free/no taxation zones. As a result, many international companies prefer to use it as a business hub rather than ports belonging to the two large superpowers. Israel will now have a foot in that massive commerce door.

The powerful opportunities afforded both Israel and the UAE were crystalized when Lavie produced a chart of key trade partners for each of them. Currently, just 4% of the UAE’s trade is with the United States, while Israel’s trade with the U.S. stands at 27%. The UAE sees the agreement as an entry into the much larger U.S. market, an enticing prize. Meanwhile, 54% of the UAE’s trade is with South and Western Asia, considerably higher than Israel’s with that region. Clearly, both countries stand to benefit greatly from their partnership.

Some of the perks are already beginning to take shape. Lavie noted that Chevron, the huge energy corporation, had always avoided doing business with Israel. However, two months after Israel normalized relations with the UAE, Chevron suddenly was knocking at its door. Japanese and Korean businesses, afraid to engage with Israel for fear of offending its Gulf partners, are now reaching out as well.

Lavie summed up by recalling his initial visit to the Gulf. “To fly east from Ben Gurion instead of west, and to see the Saudi Desert below, was conceptually groundbreaking.”

Robert Isler is a marketing researcher and writer who lives in Fair Lawn. He can be reached at [email protected]