As the Gulf crisis spills over into business, some UAE companies withdraw from Saudi defence show

Two sources who are directly involved in the matter have confirmed that some UAE companies pulled out of the'major defence exhibition' taking place in Saudi Arabia. This is the latest indication of the rift between two Gulf oil giants which has now impacted business interests.

The World Defense Show will take place from 8-12 February in Riyadh, the Saudi capital. It wasn't immediately clear whether all UAE participants in the country pavilion were withdrawn.

The Saudi government's media office and the UAE's foreign ministry did not immediately comment on this issue.

TRICKLE DOWN EFFECT

The two Gulf heavyweights, once the twin pillars for regional security have diverged on everything from oil quotas and geopolitics.

In December, their disagreements were brought to the surface when an attack by a UAE backed separatist group in southern Yemen pushed it too close to the Saudi border for comfort. This led to a Saudi coalition strike against a UAE linked weapons shipment at Mukalla port.

Since then, the UAE has withdrawn its entire force from Yemen. However, tensions are rising as Saudi Arabia claims that the UAE helped a prominent Yemeni separatist figure to escape through Somalia.

The UAE's withdrawal from the annual defense event shows that the disagreement between two oil-powers could spill over to the many trade and business relations which bind them together.

Two Gulf-based sources said that while cross-border deals are largely unaffected, tensions have started to creep down to the business world, which has quietly been preparing for possible disruptions, even as daily commerce continues.

RÉGIONAL PRECEDENT

Business community fears will grow the longer this latest Gulf dispute lingers. This is because it could lead to a similar trade boycott to that which hit Qatar last year during its standoff with Gulf neighbours.

Saudi Arabia and the UAE are linked by $30 billion worth of trade, and goods and executives move between them constantly.

Some Saudi-linked funds placed restrictions on capital deployment in Qatar during the blockade that ended in?2021. Investors fear these conditions could return if the current dispute widens.

The banks were forced to decide whether they would support the UAE, Saudi Arabia or Qatar.

The stakes are high this time, as the two economies are intricately linked.

Many Saudi family-owned companies and major firms have significant operations in the UAE. This is where their commercial leadership teams are located.

Two Gulf-based sources say that internal risk assessments now include questions about possible disruptions in flight schedules and the supply chain.

One senior business person said, "Everyone will lose if the situation escalates." Reporting by Federico Maccioni and Nazih Osseiran; Editing and editing by Jan Harvey, Louise Heavens, and David Holmes

(source: Reuters)