[Global Issue+] 'The Switzerland of the Middle East' UAE, Why It Cooperates Economically with Its Rival Iran

Confrontation with Yemen Rebels Alongside Saudi Arabia
5% of UAE Population Are Iranian Nationals

[Asia Economy Reporter Hyunwoo Lee] Interest in the United Arab Emirates (UAE) has increased recently following President Yoon Seok-yeol's visit. In particular, attention is growing toward the UAE's diplomatic policy, which is balancing diplomacy between Saudi Arabia and Iran, the regional powers in the Middle East, a region prone to localized conflicts.

The UAE has been engaged in a maritime sovereignty dispute with Iran over the islands in the Persian Gulf area for more than 50 years, and despite conflicts over the war with Yemen's Houthi rebels, economic exchanges have not been severed. Although the Middle East is rife with sectarian and ethnic conflicts, the UAE region has historically served as a bridge between Sunni and Shia communities, and this history of balanced diplomacy continues today.

[Image source=EPA Yonhap News]

UAE-Iran: Surface-Level Confrontation but Continued Trade

According to the British BBC on the 23rd (local time), the relationship between the UAE and Iran remains confrontational on the surface. The UAE, a member of the Arab League led by Saudi Arabia and a Sunni Islamic country, opposes Iran, the Shia sect's leading nation, in various aspects. Especially since Saudi Arabia has been at war with the Yemen Houthi rebels, who have been backed by Iran since 2014, the UAE has supported the Saudi military, further deepening the antagonism with Iran.

Aside from Saudi Arabia, there is also a direct confrontation issue between the UAE and Iran, namely the maritime sovereignty dispute. In 1971, when the UK withdrew from the Gulf after a long period of colonial rule, seven autonomous emirates including Abu Dhabi and Dubai formed the UAE as a federal state. At that time, Iran's Pahlavi dynasty forcibly occupied three islands in the Gulf, claiming historical ties, which led to a sovereignty dispute with the UAE that has lasted for over 50 years.

Nevertheless, economic cooperation between the two continues. Unlike Saudi Arabia, which regards Iran as an outright enemy, the UAE has not completely severed ties with Iran. Last year, the UAE dispatched ambassador-level diplomats to Iran for the first time in six years, initiating efforts to normalize diplomatic relations. When the Iran nuclear deal (Joint Comprehensive Plan of Action) was concluded in 2015, Saudi Arabia and Israel criticized it, but the UAE internally welcomed the agreement.

[Image source=Reuters Yonhap News]

5% of Population Are Iranian Nationals... Important Workforce

There are several reasons why the UAE, unlike Saudi Arabia, has not completely cut off cooperation with Iran. Historically, Sunni and Shia communities have lived mixed in the region close to Iran, and the human and material exchanges with Iran hold significant weight in the UAE.

According to CNN, unlike most other Middle Eastern countries with small populations, Iran has a population of 89 million, and a considerable number of Iranian workers are dispatched across the Middle East. Approximately 480,000 Iranian nationals live in the UAE, accounting for about 5% of the total UAE population. This is the fifth largest group among all foreign nationals in the UAE.

The total population of the UAE is known to be about 9.5 million, but only around 1 million are actual citizens, with the majority being foreign workers. Iranian workers, who are mostly skilled labor, are known to be difficult to replace. Despite religious, territorial, and diplomatic conflicts, economic cooperation between the two continues, which is interpreted to be related to the UAE's economic structure.