The previous post in this series sketched the distinctive combination in the United Arab Emirates of a federal state structure, non-democratic rule by an ethnically defined minority (10% of the population), an anxious discourse of national identity, a commitment to global free markets and market-led growth, an official policy of tolerance, and a strong internationalism. You can see all of these symbolized by the three new structures built in Abu Dhabi, the capital, for each of the Abrahamic religions (Islam, Judaism, and Christianity), flanked by the beautiful Louvre Abu Dhabi (the French brand has been leased to 2047), the Guggenheim Abu Dhabi, and the Sheikh Zayed National Museum. The latter two are scheduled to open in 2025. National identity and cosmopolitan tolerance were put in mundane context by the third Abu Dhabi Finance Week (9-11 December), which took place at the Abu Dhabi Global Markets (ADGM) complex and quite credibly promoted Abu Dhabi as “the capital of capital.”
These projects and the strategic thinking underlying them date back a number of years but the Covid crisis and the calcification of US-China rivalry gave them additional urgency. UAE planners were sharply aware by 2020 that the US, China, and India, in their different ways, were reorienting their globalization strategies to emphasize the importance of organizing production around their very large domestic markets and increasing their self-sufficiency in order to reduce their vulnerabilities to each other. Covid made this structural shift even starker, particularly in the Chinese case: large countries who could afford it were able to shut their markets more or less at will.
For a small, trade-dependent country like the UAE, these trends all led in a bad direction. There are many opinions on the moral valences of free-market globalization, but for the emirates its continuation was a question of survival, including cultural survival, and if major markets like China and the US were going to start seeing free trade as optional then the UAE would need to regroup. Covid also brought home a grim truth about dependence on expatriates: as a rule, they come for money, and they will leave for money, too. A significant number of UAE health professionals were poached by recruiters for Western countries desperate enough to raise wages. The UAE had already begun its “golden visa” program in 2019, allowing foreigners to become residents for 10 years without a local sponsor. Covid-related labor competition made it clear that the UAE needed to make itself even more attractive to expatriates. Having imported a laboring class to build the country, the UAE now needed to import an entrepreneurial upper-middle class, with a tech bias, in order to maximize its room for maneuver in a global economy whose major players were retrenching. UAE pro-family policies today are oriented toward helping both emiratis and non-emiratis raise families in the emirates. And pro-tolerance or pro-diversity policies are aimed at maximizing the pool of potential immigrants. Western discourse tends to frame tolerance and diversity in moral terms but in the UAE they have at least as much to do with factors of production.
An additional development in solidifying the UAE as a sort of Free Port in a new era of conditional globalization was US sanctions against Russia. Sanctions by the first Trump administration, in reaction to Russian actions in Ukraine, were relatively mild, but Biden-era sanctions after Russia’s invasion in 2022 were, from a UAE perspective, at a dangerous level. It was not just that sanctions so often hit UAE passport-holders with Russian names. The US’s use of SWIFT as a political tool and its corralling of European financial institutions were anathema to the aspiring “capital of capital.” The US’s increasing citation of proximity to the Russian military-industrial base as a criterion for sanctions pointed in an alarming direction, one already indicated by US containment of Chinese telecommunications, semiconductor, and AI sectors: the US-led West was engaged in a security-driven politicization of global financial, data, and trade flows. The lifeblood of emirati political economy was threatened.
The UAE’s reaction has been manifold. In technological terms, it has decided to go with Team USA (as people say) for the time being, ripping out Chinese systems in favor of Western ones. Emirati officials currently see the US as ahead in critical technological sectors, including artificial intelligence. Since the first Trump administration the US has posed a choice: either you stay with the US tech “stack” or you will be left to the mercies of the Chinese. The Biden administration was even more insistent on this point, and there is as yet no reason to suppose that the second Trump presidency will be different. So if the UAE wants to participate in the next stage of technological revolution, as it emphatically does, it will choose to do so on the US side.
Diplomatically, the UAE has become an enthusiastic participant in, and frequent convener of, most global fora. The UAE’s commitment to the World Economic Forum, beginning in 2002, has blossomed into an embrace of everything from the BRICS+ to the climate-change COP forum, a non-intuitive move for a society dependent on hydrocarbon extraction. This year’s Abu Dhabi Finance Week had twice the attendance of the previous year’s, with both China and the US well represented.
Financially, the UAE, like many economies, is trying to find ways to reduce exposure to the political use of the US dollar. The Jaywan card, for example, is one among many instances of a “national credit card” that promises two related and widely desired outcomes: protection of independence from dollar-dependent payment clearing mechanisms and securing of citizens’ credit data. Such efforts do indeed introduce frictions of sovereignty into the networks of globalization — frictions that increase costs — but given US dominance of financial and data systems, and the clear US willingness to weaponize that dominance, even as eager a globalizer as the UAE will opt to protect its sovereign power.
However, the most interesting and unexpected UAE reaction to major-economy protectionism and the politicization of financial, data, and tech systems has been its turn away from the Global North, or more precisely the rich-world countries, possibly including China and Russia, that are becoming so wrapped up in their own geopolitical agonies. The UAE will “take sides” in those struggles when it feels it must, as with the choice of Western telecommunications gear and investment in the US tech sector. But it would prefer not to, and certainly does not see the choice as one between democracy and authoritarianism — Biden’s preferred framing.
The geoeconomic shifts of the last two decades have seen the UAE go from celebrating Davos Man to championing the Global South. The UAE is the fourth largest investor in Africa (after China, the US, and Europe) and is India’s third-largest trading partner. The UAE is pioneering an era of globalization that operates at a deliberate distance from the old industrialized countries where globalization had its origins. The third and final post in this series will describe this new world and some of its implications for international investment.