Key Takeaways
The UAE is seeking to diversify its economy away from fossil fuels and develop advanced technologies. This presents significant business opportunities for both technology and oil/gas companies.
The UAE is still reliant on oil and gas to supports its diversification efforts yet presents ongoing opportunities for international energy companies to forge partnerships and joint projects, despite potential friction with US interests. However, this requires continued economic ties with Russia, especially through their membership in OPEC+.
The UAE is engaging with a range of international actors, including both the US and China, in order to access technology, expertise, and capital to support its economic transformation.
The UAE's desire to avoid over-dependence on any single power is a key driver of its diverse international engagements, even as it remains heavily reliant on the US for security. Yet it has its own strategic goals, especially in East Africa where it focuses on securing trade routes, enhancing regional stability, and limiting Turkish influence.
Balancing between the US and China
The UAE is at the centre of US-China rivalry in the Middle East, especially as it seeks to diversify its economy and wean itself off of fossil fuels. Abu Dhabi understands that it must look for alternative avenues to develop its economy considering the world’s shift to renewable energy. This is reflected in two major government policies.
The first, UAE Energy Strategy 2050, aims to triple its share of renewable energy by 2030, increase the installed clean energy capacity from 14.2 GW to 19.8 GW by 2030, and achieve net zero carbon emissions by 2050. The government has promulgated a long-term vision in the form of a road map titled UAE Centennial 2071. This sets out its ambition to develop the country’s soft power, secure its position (in particular Dubai’s position) as a global hub for finance, and develop an economy based on advanced technology. The latter is of particular relevance to the ongoing rivalry between China and the US as the UAE is dependent on foreign powers to help develop the sector. Abu Dhabi also aims to make its education system competent in advanced science and technology, space science, engineering, innovation, and health sciences. As a transactional actor, however, the UAE seeks to retain its neutrality between the two powers and does not want to render itself dependent upon the US or China.
These tensions have been particularly visible with the G42 Group – a technology company specialising in artificial intelligence, cloud computing, data storage and infrastructure, medical technologies, and geospatial intelligence services to global clients. The company is overseen by Sheikh Tahnoon bin Zayed Al Nahyan, the UAE's National Security Advisor, through his position as the chairman of the Abu Dhabi Holding Company (ADQ), as well as various private investment vehicles and entities. Among these is Chimera Investments, a private investment firm closely linked to the Abu Dhabi royal family. Initially, G42 relied on Chinese investment and technological support to fuel its rise. The company’s underlying technology infrastructure (‘stack’) was developed with the assistance of Huawei, amongst other Chinese companies. In addition, one of its subsidiaries provides surveillance technology which is very similar to that used by Chinese law enforcement, suggesting close cooperation in the development of technologies.
The US is concerned that companies such as G42 are being used to steal sensitive technology to China, as many of their products possess dual military-civilian applications or receive export-controlled technology from partnerships with American companies. Republican congressman Mike Gallagher, Chairman of the House Select Committee on the Chinese Communist Party, sent a letter to Commerce Secretary Gina Raimondo expressing serious concerns about the risks associated with export controls related to G42. The letter stated that the firm maintains connections with blacklisted organizations, including Huawei and the Beijing Genomics Institute (BGI). This fear also takes on a direct military dimension in that G42 provides AI and technological solutions for the UAE armed forces, which sources many of its arms from Western suppliers. KSG considers its extremely likely that the US government will continue to scrutinise non-US entities that maintain relations with both US and Chinese companies and are active in advanced technologies. However, as seen through the lens of the Emiratis, this demonstrates their desire to tap into expertise from a range of international actors and their intent to limit dependencies. Although the US remains the UAE’s security guarantor of choice, this position has been called into question.
To realise its Centennial 2071 vision, the UAE is betting on a wide variety of actors. This is why although the deals between Microsoft and G42 were sanctioned by American security officials on the back of the Emirati concessions regarding cooperation with Chinese firms, there are still concerns from American security circles surrounding the company’s links to China. This is also applicable to cooperation in other realms, given the UAE’s concern regarding US dependability. An example of this is the Port of Khalifa, an Abu Dhabi port in which COSCO Shipping Ports, a subsidiary of China's COSCO Group, signed a 35-year concession agreement to develop and operate a container terminal in 2016. In December 2021, the UAE stated that it had ceased Chinese construction at the facility after US officials claimed that Beijing intended to use it for military purposes. However, a year later documents leaked by Jack Teixeira as part of the Discord Leaks, suggested that construction had continued and that that facility represents an attempt by China to establish a base in the UAE.
Ambitions in East Africa
East Africa has significant strategic importance to the UAE, focused on securing critical maritime trade routes, enhancing regional stability, and investments in ports and infrastructure. In particular it supports stability via nation-building and counterterrorism efforts to combat extremist groups. This is driven by the UAE's concern that fundamentalist Islamist groups could inspire radicalisation within its borders, threatening its own governance model and regional stability. As a pragmatic actor, the UAE’s attempt to diversify its economy is inseparable from its strategic security goals. In this vein, it is not opposed to aligning itself with other powers when interests overlap. This is particularly the case with the US given it is the UAE’s preferred security provider, as demonstrated by its signing of the Abraham Accords with Israel in exchange for the sale of F-35 stealth fighter and technological cooperation with Israel.
This informed recent deals made between G42 and Microsoft. In April 2024 Microsoft invested $1.5 billion in Abu Dhabi’s G42 to speed up AI development and support its global expansion. The deal has the favour of US security officials, as it stipulates the phasing out of Chinese hardware. Microsoft and G42 followed-up in May 2024 with a $1 billion joint investment conducted by Microsoft and G42 in Kenya focusing on local-language AI model development, an East Africa Innovation Lab with AI skills training, connectivity investments, and collaboration with Kenya’s government for secure cloud services in East Africa. The agreement coincided with the state visit of Kenyan President William Ruto to the US.
The desire for regional influence was likely a factor for the joint investment between Microsoft and G42 in Kenya, as the US is concerned about expanding Chinese influence in Africa generally. It thus met the geopolitical and business goals of the US and UAE. China is one of Kenya’s largest bilateral lenders, accounting for 8.8% of Kenya’s total external debt as of 2022, raising concerns about debt sustainability. Much of it was accrued during the construction of major infrastructure projects like the Standard Gauge Railway (SGR), which have drawn criticism for their questionable financial validity and environmental impacts.
The UAE is committed to limiting Turkish influence in East Africa as it is a traditional regional rival. While the two states hold opposing views on Islamist groups and support for different regional proxies, Turkey under President Erdoğan has supported Islamist groups like the Muslim Brotherhood and the two countries often support opposing sides in various proxy conflicts. Turkey has been steadily increasing its footprint in the Horn of Africa. For example, Ankara has operated its largest overseas military base, Camp TURKSOM, in Mogadishu since 2017and the Turkish firm Favori LLC has been responsible for managing Mogadishu’s international airport since 2013. Recently it has been positioning itself as a mediator, in particular lending itself to negotiations in ongoing disputes between Ethiopia and Somalia over the de-facto independent region of Somaliland. The territory is nominally part of Somalia, but receives significant support from the UAE, not least because the country’s state-owned logistics company, DP World, owns a majority stake and a 30-year concession for the Red Sea port of Berbera.
Turkey and Somalia signed a raft of agreements following a memorandum of understanding (MoU) agreed upon between Ethiopia and Somaliland in January 2024 which granted Ethiopia a 50-year lease on land along Somaliland's Red Sea coast and access to the Berbera port in exchange for potential recognition of Somaliland's sovereignty. This included the ‘Defence and Economic Cooperation Framework Agreement’ in February 2024 establishing the Turkish Armed Forces as a partner in Somalia’s maritime security and law enforcement until 2034. Additionally, energy ministers from both countries signed an MoU in March 2024
enhancing bilateral cooperation in exploring Somalia's oil and gas resources. Although it seeks to be perceived as a neutral arbitrator, it implicitly backs Somalia due to its rivalry with the UAE.
Co-operation with Russia
In addition, the UAE maintains close economic ties with Russia, much to the US’ dismay. Following Russia’s 2021 invasion of Ukraine, the UAE did not join Western sanctions. Underpinning this is its desire to tap Russian finance, with many Russians parking assets in the Gulf State following their inability to access financial institutions. With Saudi Arabia’s Crown Prince, Mohammed bin Salman, embarking on a massive modernisation program that seeks to make the Kingdom a financial centre, the UAE wants to secure Dubai’s position as the go-to place to conduct business. Lastly, Oil remains a critical component of the UAE economy, constituting up to 30% of the country’s GDP in 2021 figures, upon which cooperation with Russia via OPEC+ remains a critical component. This is especially the case given that OPEC+ decided to continue collective crude production cuts into 2025 and that the annual growth rate of extractive industries (including crude oil and natural gas) in the UAE grew by 9.5% from 2020-2021.
Looking Forward
The US has scored consistent victories over the Chinese in recent years to gain greater influence in the UAE. The UAE’s decision to sever many of G42’s ties with Chinese companies whilst agreeing to normalise relations with Israel in the Abraham accords point to greater influence lying with the US than China. Nonetheless, the UAE has not entirely abandoned China, and still maintains significant ties such as through a continuing membership of the Belt & Road Initiative. Although KSG assesses that relations between the UAE and US are much close than between the UAE and China, it also considers it likely that the coming months will see Abu Dhabi make gestures towards China. This is due to the upcoming US election and the UAE’s desire to improve its bargaining power ahead of potential talks regarding the renewal of security relations.
KSG assesses that the UAE’s continued reliance on fossil fuels and its continued growth presents ongoing business opportunities for international oil and gas companies to forge partnerships and joint projects with Emirati entities. Its desire to avoid over-dependence on any single power will make it continue to engage with a diverse set of international energy companies, potentially including players from the US, EU China, Russia, and other major producers. Such joint projects would allow the UAE to leverage foreign expertise and capital to develop its oil and gas resources, while also enabling international firms to access the lucrative Emirati market.
KSG assesses that co-operation with Russia is only set to increase. Primarily, this will be done via their joint membership in OPEC+ , where implemented production cuts to support higher oil prices are currently in place. These are crucial for both Emirati and Russian financial stability and long-term growth. However, Russia is aware that the US has had reservations about selling the UAE advanced weapons platforms. As the UAE seeks to renegotiate its security relationship with the US, KSG believes that the UAE might entertain Russian offers to provide its own weaponry as an alternative to gain leverage. This consideration is likely to spur Western suppliers – but in particular the US – to press the American government to compromise with Emirati demands for fear of losing out on the lucrative Emirati market. Nonetheless, it is unlikely that the UAE would opt for Russian over US weaponry given its quality. UAE co-operation with Russia inherently reduces Ukraine’s likelihood of victory in the Russo-Ukrainian conflict, given the wealth it brings to Moscow.
The UAE's ambitious plans to diversify its economy and develop advanced technologies, as outlined in its Energy Strategy 2050 and Centennial 2071 initiatives, present significant business opportunities for Western technology companies. The Gulf state's reliance on foreign expertise and its willingness to engage with both US and Chinese firms to build its technological capabilities create an environment ripe for collaboration and investment.
However, these opportunities come with risks for Western firms, as they may face increased scrutiny over the potential for sensitive technologies to be stolen by China. Entities like the UAE's G42 group, which has connections to both US and Chinese companies, have drawn the attention of US officials concerned about technology transfer.
As a result, KSG cautions Western companies to exercise extra due diligence when partnering with Emirati tech firms to ensure compliance with export controls and mitigate the risks of intellectual property leakage. KSG does not consider it likely for Emirati companies to sever their ties with Chinese entities entirely. The UAE government is highly likely to continue pursuing a diversified development model, which in turn will influence the US government to continue its scrutiny of UAE technology companies that maintain relations with both US and Chinese companies.
In contrast, firms that seek to collaborate with the UAE through purely financial means, without the transfer of sensitive technologies, may face fewer such risks. Navigating the complex web of US-China rivalries and Emirati strategic interests will be crucial for Western firms seeking to capitalize on the UAE's economic transformation.