The idea of an “Asian Century” has gained considerable traction in recent years. The global economic center of gravity, located around the mid-north Atlantic Ocean in 1980, is projected to be squarely between India and China by 2050. Asia accounted for approximately a third of global gross domestic product (GDP) in 2000 and by 2040 should account for more than 50%. This structural change in the global economy is causing reverberations across Eurasia, and the United Arab Emirates (UAE) is a textbook example of this shift. 

With a long history of cooperation with the United States and the United Kingdom, the UAE has traditionally been oriented westward, especially in its political and security considerations. In the twenty-first century, a more balanced approach is taking shape, as Asian countries and markets are beginning to feature more significantly in the UAE’s political, economic, strategic, and cultural interests.  

Extra-regional powers have always played an important role in the UAE’s foreign and security policies due to its unique characteristics. For one, it is a relatively small state in a dangerous region. It has a population of just under 10 million and of that approximately 88% are expatriate. Because of this unusual demographic composition, the UAE’s economy is heavily reliant on a workforce without a path to citizenship, creating a sense that many could pack up and leave in bad times. A threatening security environment compounds this economic dilemma. The UAE’s armed forces have an estimated 50,000 troops. Meanwhile, its neighbor and rival Iran is a country of just under 82 million, with a nearly 400,000-strong military force. The UAE lacks the conventional means to respond to such asymmetry and as a result has made the long-standing Defense Cooperation Agreement with the United States a major pillar of Emirati security. However, in recent years inconsistent signaling out of Washington has contributed to a sense that a more diversified set of extra-regional partners would better serve the UAE’s interests. That is not to say that the United States is on its way out; as Hoyakem and Roberts describe in a recent report, relations with India and China, among others, “are expected to complement and supplement, not replace, the U.S. security cover.”  

The UAE has been successful in using its economic power to address its security dilemma. It is a global energy power and a major source of foreign direct investment and has established itself as the most business-friendly country in the Middle East–North Africa (MENA) region. This means that rich and powerful countries and companies from around the world are invested in a safe and stable UAE. Not long ago, many of these were from the West, but increasingly we see economic relations intensifying between the UAE and a wide range of Asian powers. Its ambitious diplomatic efforts, evident in the dramatic recent announcement that the UAE was normalizing relations with Israel, has contributed to a perception among extra-regional powers that have to navigate a challenging Middle East that the UAE is a useful partner.  

During his 2019 state visit to China, Abu Dhabi’s Crown Prince and the UAE’s de facto ruler Sheikh Mohamed bin Zayed said that the two countries were “laying pillars of a road map for the next 100 years.” As this essay shows, the foundations for the UAE’s outreach to Asia are already deep and indicate that the crown prince’s statement is not merely the empty rhetoric of a state visit, but rather evidence of changing dynamics in Asian–Middle East relations.  

THE CENTRALITY OF ENERGY TRADE

As a major oil exporter, much analysis on the UAE naturally begins with energy. It has the world’s seventh-largest proved oil reserves at just under 98 billion barrels and is also the world’s seventh-largest producer, at approximately 3 million barrels per day (bpd). Hydrocarbon exports are worth approximately 20% of the UAE’s export revenue, accounting for 30% of its GDP.

Given the importance of energy exports to its economy, the UAE’s energy trading partners play a major role in its economy, and Asian countries feature significantly. Over the past 10 years, the UAE’s top 10 export destinations have consistently included India, Japan, China, South Korea, Singapore, and Thailand. Data from Chatham House’s Resource Trade show that fossil fuel exports from the UAE to five Asian countries in 2018 – China, India, Japan, Singapore, and South Korea – were worth nearly $58 billion. Since the federal budget for that year was announced as AED51.4 billion ($13.9 billion), the significance of the Asian energy trade is apparent. It has to be emphasized that this is not a blip on the radar; Asia will continue to be a major market for Gulf hydrocarbons. The growth of the Asian middle class will drive up demand for consumer goods, and oil- and gas-derived petrochemicals such as fertilizers, lubricants, and food preservatives will be a big part of that – Asian hydrocarbon demand is not decreasing. Despite real efforts to diversify energy use, oil consumption is projected to grow in all major Asian economies in the coming decades. China and India will drive much of this growth, with Chinese oil consumption projected to increase from 13.1 million bpd in 2014 to 20.8 million bpd in 2040. India’s oil demand is forecast to hit 10 million bpd by 2040, up from 4.7 million bpd in 2017. Southeast Asia’s demand is expected to increase from 4.7 million bpd India’sto 6.6 million bpd. Both Japan and South Korea, with export-driven economies and very little in the way of domestic energy resources, rely heavily on Gulf energy as well; the UAE supplies Japan with around 25% of its oil and South Korea with 8%. The UAE will therefore continue to focus on Asian markets, and ADNOC, Abu Dhabi’s energy giant, has announced that it plans to increase its crude production capacity to 3.5 million bpd to support future demand in Asian markets.

Diversifying the Energy Relationship

A sign of Asia’s growing importance in the UAE’s energy sector was seen in the most recent awarding of stakes for a 40-year offshore concession. The previous legacy concession was dominated by Western oil companies, upon which the UAE relied for technology and expertise.  This recent round reflected a shift, as ADNOC was motivated by “the need to secure outlets in the world’s key demand growth center, Asia.” This round of contracts started in 2015, and Asian oil companies were well represented. Japan’s Inpex was awarded a 5% stake and South Korea’s GS Energy a 3% one, both in 2016. The next year, China National Petroleum Company (CNPC) signed for an 8% stake and CEFC for a 4% one. In 2018, a consortium of three Indian oil companies – ONGC Videsh, Indian Oil Corporation, and Barat PetroResources – also signed concessions with ADNOC. These three together represent more than 2.65 million bpd of refining capacity; with India the world’s third-largest oil consumer, this deal provides ADNOC with a foothold in a major long-term market.

At the same time, energy prices have been in decline since 2014, a trend that this year’s Covid-19 pandemic will only further exacerbate. ADNOC has already started to adjust to this new market reality by increasing its emphasis on downstream production. With the expectation that the market share of petrochemicals will grow 150% by 2040, ADNOC CEO Sultan al Jaber has said that the company is repositioning itself as a “leading global downstream player.” To achieve this, it is coordinating efforts with Asian partners. For example, ADNOC and Saudi Aramco are jointly building a 1.2 million bpd refining complex in India at an estimated investment of $70 billion, with the two companies together taking a 50% stake. This is reflective of a larger trend, as ADNOC has been especially active in Asian downstream investments in recent years.  In 2019 alone, it signed cooperation agreements with China’s Rongsheng Petrochemical Co. and China National Offshore Oil Company (CNOOC), another with Wanhua worth potentially $12 billion, and one with Indonesia’s PT Petramina for $3 billion worth of investments into Indonesia’s energy infrastructure. Mubadala, Abu Dhabi’s sovereign wealth fund, is in talks about a $6 billion refinery in Pakistan’s Baluchistan region. 

The UAE has also been signing several contracts with Asian firms to develop its own domestic energy capacity and to support major projects, such as its $45 billion “downstream silicon oasis” project in Ruwais, which is projected to transform a small town 230 km outside Abu Dhabi into a refining, petrochemical, and conversion hub. In March 2018, South Korea’s Samsung Engineering signed two contracts worth $3.5 billion with ADNOC on a major upgrading project on the Ruwais refinery. Other major projects are underway in the emirate of Fujairah, located on the Arabian Sea and featuring the world’s second-largest bunkering port.  In February 2019, South Korea’s SK Engineering & Construction signed a contract with ADNOC to build an underground crude storage facility in Fujairah, a deal that al Jaber linked to enhancing the UAE’s energy security. ADNOC also signed a $600 million pipeline investment project with Singapore’s sovereign wealth fund GIC, which controls 6% of the assets.  In one of China’s first significant infrastructure projects in the UAE, a CNPC subsidiary built a pipeline connecting the Habshan oilfield to the Fujairah port. It became operational in 2012 and has a capacity of 1.8 million bpd. In 2013, Sinopec and Singapore’s Concord Energy invested $252 million in a Fujairah oil-storage facility, the largest in the region, and Sinopec leases half.

The UAE has been working to reduce its own dependence on oil with the goal of 56% of power generation from clean energy by 2050: 38% from gas, 12% from clean coal, and 6% nuclear. This has created opportunities to expand energy relationships beyond hydrocarbons. Most noteworthy, in 2009 South Korea’s Korea Electric Power Corporation and the UAE’s Emirates Nuclear Energy Corporation signed a $20.4 billion contract to design, build, and operate four ARR1400 nuclear power units at the Barakah nuclear power plant, which opened in 2020. It is expected to generate a quarter of the UAE’s electricity, offsetting 21 million tons of greenhouse gas emissions per year. The UAE has also engaged with China in this regard.  In a major deal, China’s Silk Road Fund partnered with Saudi Arabia’s ACWA Power on the fourth phase of Dubai’s Mohammed bin Rashid Al Maktoum Solar Park, the world’s largest solar plant at 44 km2, providing clean energy for 320,000 residences and reducing 1.6 million tons of carbon emissions per year. This was a sign of things to come, as in May 2020 Silk Road Fund purchased a 49% stake in ACWA, whose CEO said the collaboration will support “ambitious growth planned in the renewables sector in MENA, Africa, Asia, and Central Asia.”  

Taken together, we see a set of energy relations transitioning away from the typical oil import-export dynamic toward a more sustainable and well-rounded one that creates deeper levels of interdependence and represents an important role for Asian countries in the UAE’s energy future.

UAE-Asia Investment Flows

UAE-Asia economic relations are also lubricated through investment, both inward and outward, as well as through joint investment platforms. The UAE is the top destination for foreign direct investment (FDI) in the Arab world and ranked 27th globally. In 2018, it drew in $10.4 billion, accounting for 36% of FDI flows into Arab countries, and by region Asian countries were the largest source of FDI into the Emirates, followed by Europe, North America, and Africa. To maintain its position as an attractive FDI destination, the UAE announced in July 2019 a list of 122 economic activities across 13 sectors where foreign investors would be allowed 100% ownership, including renewable energy, space, agriculture, manufacturing, transport, logistics, and hospitality. China has been especially active in investments and contracting in the UAE, with an estimated $34.7 billion invested since 2005, with energy and real estate taking the lion’s share.  India likewise is a major investor into the UAE, especially Dubai. More modest but not unsubstantial, Japanese investment into the UAE has reached more than $3.9 billion, and Singapore has stock investments in the Emirates valued at $3 billion.

FDI also moves from the Emirates to Asia. The UAE was ranked the 19th largest source of global FDI in 2018, with outflows totaling $15 billion. The UAE has stock investments in Singapore valued at $3.6 billion and is the tenth-largest investor in India, with stocks valued at $4.76 billion, making it the top source of investments among Arab countries. The importance of Emirati investments into India is evident in the range of infrastructure projects planned, including railways, ports, airports, industrial corridors, and roads. This is being institutionalized through partnerships between India’s National Investment & Infrastructure Fund and Abu Dhabi Investment Authority and DP World. 

The UAE has established joint investment funds as another means to develop economic relations with Asian states. During Mohammed bin Zayed’s state visit to China in 2015, Mubadala, one of the UAE’s sovereign wealth funds, signed a $10 billion joint investment fund with China Development Bank Capital and China’s State Administration of Foreign Exchange, called the UAE-China Joint Investment Fund, capitalized equally by both governments. President Xi Jinping described the fund as a means of strengthening strategic and economic relations, while the crown prince said it “represents the next stage of our partnership as we seek to work more closely in developing our economies and contributing to global growth.” DP World has established a joint investment fund with India’s National Investment and Infrastructure Fund, set up in 2018 and capitalized with $3 billion, to “acquire assets and develop projects in sea and river ports, freight corridors, special economic zones, inland container terminals, and logistics infrastructure such as cold storage.” Korea too has an investment cooperation agreement with the UAE; the Investment Corporation of Dubai and Korea Investment Corporation signed a deal in 2015 “that facilitates communication between the two organizations while empowering them to jointly explore investment opportunities in the UAE, South Korea, and other countries.”

These dense economic ties are not taking place in isolation. The UAE has been actively developing its political and diplomatic relations across Asia in recent years, befitting such a large growth in shared economic interests. This has involved frequent high-level bilateral visits both to and from the UAE as Emirati leaders and their Asian counterparts have worked to strengthen relations that until recently were relatively underdeveloped. 

The UAE’s increased clout in Middle Eastern political, economic, and security affairs has made Abu Dhabi an important stop for global leaders, and recent years have seen a growth in Asian state and official visits.  Given the centrality of Middle East energy to Asian economies, strong relations with influential regional states are important, and we have seen a corresponding outreach from Asian capital cities to Abu Dhabi. Five Korean presidents have visited since the Barakah deal was announced in 2009. Prime Minister Shinzo Abe has visited four times, and Prime Minister Narendra Modi has paid three state visits. With much of the Middle East marred by political, economic, and security turbulence, the UAE’s relative stability and increasingly muscular regional foreign policy make it an important partner for leaders with an interest in the region.

This is especially relevant in light of the normalization of diplomatic relations between the UAE and Israel, announced in August 2020. While this was perceived as a dramatic turn of events in the Middle East, the two countries have been cooperating quietly for many years. To openly establish ties was a matter of formalizing a bilateral relationship that had become increasingly mature. For Asian countries with interests in the Middle East, the UAE-Israel relationship is significant in that it makes it easier to navigate regional tensions, allowing them to continue strengthening their own ties to Israel without alienating their partners in Abu Dhabi.   

The security realm is the most underdeveloped aspect of the UAE’s relations with Asian states. This can be attributed to two structural factors: the UAE’s preoccupation with its own regional security concerns and its long-standing security relationship with the United States. These result in two subsidiary factors: the UAE’s limited capacity to project power beyond the Middle East and a reluctance of Asian states to needlessly get involved in what appears to be an intractable security environment. 

The Gulf is best understood as a regional security complex. Gulf states and their leaders are more concerned with one another than with issues beyond their immediate region. As a result, foreign and security policy decisions are first and foremost filtered through the lens of how they would affect an intensely competitive regional dynamic. For Emirati leaders, key concerns at this level include material threats from Iran or its proxies, ideological threats represented primarily by the Muslim Brotherhood and political Islamic groups, or instability spreading through fragile or failed states throughout the Middle East. As such, the bulk of the UAE’s security resources are devoted to Middle East issues rather than less immediate ones farther afield. 

Losing the U.S. Security Umbrella?

The UAE’s deep security partnership with the United States is another consideration. After the Carter Doctrine was announced in 1980, U.S. regional presence intensified. The Defense Cooperation Agreements (DCA) the United States signed with the UAE and three of its GCC partners (Kuwait, Qatar, and Bahrain) in the early 1990s solidified the U.S. commitment to maintaining a regional status quo that favored the GCC states and isolated Iran. This resulted in a massive U.S. military presence in the Gulf region in support of this status quo, with approximately 4,000 troops stationed in the UAE, a significant air force presence at the Al Dhafra Air Base, and training of Emirati troops. 

The security umbrella provided by the United States means GCC states – and their extra-regional trading partners – have not had to take on the responsibility of maintaining open shipping lanes.  For the UAE, this means that its military resources remain devoted to regional issues. In the period since the first wave of Arab uprisings, the UAE has transitioned from its traditionally modest foreign policy in the region to a more muscular one. Its relatively small armed forces of approximately 50,000 personnel have participated with the United States in operations in Somalia, the Balkans, Afghanistan, Libya, and Syria, and with Saudi Arabia in Yemen. This increase in Emirati military engagement led former U.S. Secretary of Defense Jim Mattis to refer to the UAE as “Little Sparta” and describe its troops as “great warriors,” while Anthony Zinni, former commander of U.S. forces in the Middle East, claimed, “It’s the strongest relationship that the United States has in the Arab world today.”

The U.S. presence in the Gulf has also shaped Asian approaches to regional security.  Knowing that their trade and investment opportunities are guaranteed by the American security commitments, other states have taken advantage and deepened their engagement in the region without the associated costs. While China has often been derided as a free rider, it is not unique in this – most states doing business in the Gulf have been doing it on the back of the U.S. military. 

The perception of a softening U.S. commitment to Gulf security in recent years has been changing this calculus, however. This is a long-standing concern of Gulf leaders and is a structural feature of an asymmetrical partnership that is based on interests rather than values. U.S. interests in the Middle East have been changing since the disastrous invasion of Iraq in 2003, with both American political parties and much of the public expressing a desire for a reduced role in the region. Under President Donald Trump, this process has continued, despite initial hopes among Gulf leaders that his election signaled an expansion of American power in the Gulf.  A Tweet from President Trump in 2019 is indicative: “China gets 91% of its Oil from the Straight [sic], Japan 62%, & many other countries likewise. So why are we protecting the shipping lanes for other countries (many years) for zero compensation. All of these countries should be protecting their own ships on what has always been a dangerous journey. We don’t even need to be there in that the U.S. has just become (by far) the largest producer of Energy anywhere in the world!” This is not just rhetoric; the Trump administration’s responses to several recent events have confounded many throughout the region and reinforced the long-running perception of a U.S. retreat. During the second half of 2019, oil tankers were attacked, presumably by Iranian agents, in the UAE’s Fujairah port, and then again in the Sea of Oman. The U.S. president called for a drone strike against Iran in retaliation but called it off at the last minute. These attacks were followed in September 2019 by a major strike on Saudi Aramco’s facilities in Abqaiq and Khurais, which the president described as “an attack on Saudi Arabia, and that wasn’t an attack on us.” For some leaders in the Gulf, the U.S. commitment to deterring Iranian aggression appears less than ironclad, making outreach to other extra-regional countries an important response to an unstable regional security environment.

Strategic Hedging

The UAE has also been developing nascent security and defense cooperation with China, although this presents bigger challenges. While Japan and South Korea are both U.S. allies, China is more and more its strategic competitor. The UAE therefore has to maintain a delicate balance to strengthen ties with Beijing without alienating Washington. At the same time, Chinese leaders are conscious of the fact that the U.S. security role in the Gulf has provided significant benefits for China as well, so disrupting this is not in its interests either. To that end, security cooperation between the UAE and China has thus far been at a low level. The UAE purchases armed drones from China, but this too is influenced by the United States; American drones are acknowledged as better than Chinese ones but require approval from the U.S. Congress to be sold overseas. Therefore, the Emirati purchases from China are filling a gap in the market that the UAE would prefer be addressed by the United States. The Trump administration, recognizing the market it is missing out on, has been considering ending the system for congressional review of foreign weapons sales, but this would be politically difficult to pass through Congress, facing opposition from both sides of the aisle.

In its security and defense outreach to Asia, the UAE’s approach should be seen as strategic hedging. The United States is “their indispensable and most capable ally” and remains the security partner of choice in Abu Dhabi. At the same time, an over-reliance on a partner that is increasingly signaling a desire to minimize its commitments is a dangerous liability for a relatively small state in a volatile environment. As such, the UAE is diversifying its relationships with Asian partners, although these are expected to be supplements to that with the United States, rather than a replacement. No Asian country offers the same range of security commitments as the United States, and none has the same kind of capacity to support the UAE in its regional security concerns. At the same time, the depth of Asian nations’ interests in the Emirates offers other forms of leverage that can contribute to security. For example, China’s large expatriate population and significant assets and businesses in the UAE suggest that Beijing would not respond favorably should Iran threaten those interests. Given the one-sided nature of the China-Iran relationship, it appears that Beijing has significant influence in Tehran. As such, the UAE-China partnership contributes, albeit indirectly, to Emirati security. The current trajectory indicates that Asian states will continue to haltingly increase their security role with the UAE, and Abu Dhabi is keen to engage.

Given the UAE’s long orientation toward the West, it is starting from a rather shallow point as far as relations with Asia at the non-elite level are concerned. India and Pakistan are exceptions, as long-standing historical ties make for a deep level of cultural ease. With Southeast and East Asia, people-to-people and cultural relations are at a nascent stage, but there is recognition that this is an important facet to develop.

Taken together, the different facets of the UAE’s outreach to Asia described here give evidence of a substantial foundation for a sustainable long-term set of relationships. Economically centered by design, different elements have been steadily increasing in importance, and the structure of the UAE’s Asian Century is starting to take shape. 

The 2020 Covid-19 pandemic offers a dramatic example of this. When the coronavirus first broke out in China, the UAE was a ready donor, providing material and rhetorical support. It was included in a list of 21 countries that the Chinese Ministry of Foreign Affairs spokesperson publicly thanked for providing “friendly understanding, support, and help.” Its symbolic gestures of projecting the Chinese flag on several landmark buildings in Abu Dhabi and Dubai was appreciated by the Chinese embassy, with its charge d’affaires saying in an interview, “When Burj Khalifa, Adnoc Headquarters, and other UAE iconic landmarks lit up the colors of the Chinese national flag and slogans of solidarity with China on February 2, many Chinese living and working here in the UAE were moved to tears.”

Beyond the political messaging, however, China and the UAE have been steadily cooperating on their Covid-19 response. In March 2020, the UAE’s G42, an artificial intelligence firm, signed a partnership with China’s BGI, a genetics company, to build a massive Covid-19 detection lab. It has been used to aggressively test for the virus, giving the UAE one of the world’s highest per capita test rates. Since then, China National Biotec Group has been authorized by the UAE’s Ministry of Health and Prevention to begin phase three trials of a vaccine in the UAE.

This close cooperation between an important U.S. ally and its major strategic competitor is a concern for Washington, with one U.S. official warning that the UAE risks “rupturing the long-term strategic relationship they have with the U.S.” There is no sign that the UAE is willing to scale back this cooperation, however. The U.S. response to Covid-19 does not inspire confidence in its partners or allies; in a public health crisis, leaders will work with partners that have demonstrated some level of success.  The UAE's Foreign Minister Sheikh Abdullah reinforced this point, describing China as “a role model for disseminating hope for successfully fighting COVID-19” while praising “the decisive counter-coronavirus arrangements taken by the Chinese leadership and the Chinese people's compliance with these measures to bring the pandemic under control inside Chinese territories over the past period.”

China is not the UAE’s only Asian partner that it can turn to in this crisis. Cooperation in public health is a feature in its strategic partnership agreements with both South Korea and Singapore; while these countries’ experiences with the coronavirus have been challenging, they can draw on best practices from governments that have been at the forefront in dealing with it.

At the same time, the coronavirus crisis has also highlighted some of the underlying problems in UAE-Asia relations, especially with regard to its massive South Asian expatriate population. The case of India alone is illustrative, with 500,000 Indian residents of the UAE having registered to be repatriated, and more than 130,000 having returned home by early July. Approximately 36,000 Pakistanis have lost their jobs in the UAE since the pandemic began. In a country where residency visas are linked to employment, the dramatic economic slowdown threatens the Emirates with a labor drain. While other Gulf countries, notably Kuwait, have portrayed the expat flight as a means of addressing underemployment for citizens, the UAE recognizes that it is heavily reliant upon foreign workers, and that “an exodus of expatriates” could “prolong the virus-induced slowdown.” This may lead to a reconsideration of the country’s labor and residency policy as the coronavirus has laid bare the economic vulnerabilities inherent in its economic model. 

When the UAE begins to transition from the immediate crisis of the pandemic to a long-term post-coronavirus world, it is going to require a deep pool of partners across diplomatic, economic, and security issues. The gains it has made across Asia will continue to expand and require coordination across a wider set of issues, resulting in deeper and more multi-faceted relationships.     

Jonathan Fulton is an assistant professor of political science at Zayed University in Abu Dhabi, United Arab Emirates, and a nonresident senior fellow at the Atlantic Council. His books include China’s Relations with the Gulf Monarchies, Regions in the Belt and Road Initiative, and External Powers and the Gulf Monarchies.