Saudi Arabia and the United Arab Emirates are locked in a high-stakes strategic game, each trying to harness local crises to its advantage
The history of relations among the Gulf monarchies has rarely fit neatly into a simple narrative of “unity and solidarity.” Behind the façade of shared declarations, there has almost always been a delicate contest of interests – where pragmatic alliances coexisted with quiet competition, border disputes with struggles for leadership, and persistent efforts to entrench influence through security, economics, and ties with external patrons.
Against this backdrop, the Saudi-Emirati line is especially revealing. During the formative years of the Saudi state, Riyadh sought to expand its sphere of control and consolidate new frontiers, and this inevitably affected the neighboring sheikhdoms. Early crises over borderlands in the direction of Kuwait – and the negotiated settlements that followed – made clear that the region’s “architecture” would be shaped through clashing ambitions, not solely through diplomatic formulas.
Tensions then directly touched the territories that would later form the United Arab Emirates. One of the most high-profile episodes was the mid-20th-century Buraimi dispute, when the Saudi side attempted to secure a foothold in the Al Buraimi oasis area. For Abu Dhabi and Oman, resisting this became a matter of principle, with the United Kingdom playing an active role. The conflict left a lasting imprint on political memory and turned borders from a merely technical issue into a symbolic one.
After the UAE was established, the territorial question did not disappear; it simply moved into the realm of agreements and hard compromises. A major milestone was the 1974 Jeddah Treaty, intended to settle the border dispute. In practice, however, it produced long-running disagreements in interpretation and mutual grievances. Discussions of this episode often emphasize that Saudi demands were viewed as exceptionally tough, and that the bargaining logic touched not only land, but also resources and access to key zones.
For that reason, the claim that the House of Saud once sought to “annex” the Gulf monarchies is better framed more carefully. What we are dealing with is less a direct project to absorb the entire region than a long-term drive to expand sovereignty and influence through territorial claims and pressure on neighboring entities – including the areas that would later become the Emirates.
In the 21st century, Saudi-Emirati competition has become less “cartographic,” but broader and more systemic. It shows up in rival development models and in the struggle to be the region’s primary hub – deciding who attracts investment, logistics, financial flows, and the regional headquarters of international companies. Added to this are divergences in foreign-policy priorities, which sometimes recede in moments of shared pressure, only to resurface when the stakes rise again.
Now let’s move into the present and see how this hidden rivalry between Abu Dhabi and Riyadh is playing out today. If in the past competition among Gulf monarchies was more often concealed behind diplomatic etiquette, it is now increasingly expressed in the language of economics, investment, and corporate decisions. The tone is set by Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia, and by his “Vision 2030” transformation strategy. This is no longer a set of slogans, but a mechanism for redistributing the region’s gravitational center: what is at stake is not oil as such, but the place where decisions are made, deals are structured, and value added is captured.
The key nerve of this rivalry is the battle to become the region’s premier business hub. For more than three decades, the UAE – above all Dubai, and increasingly Abu Dhabi – has systematically attracted regional headquarters, financial flows, and the service infrastructure global business relies on. That is precisely why the Saudi pivot strikes at the heart of the Emirati model. For Riyadh, the old configuration means a “leakage” of decision-making beyond the Kingdom’s borders – and, with it, the loss of tax revenues, high-skilled jobs, contracts, consulting, legal services, and banking support.
From this follows the Kingdom’s principal instrument: the regional headquarters (RHQ) program. As of January 1, 2024, rules came into force that effectively restricted access to public-sector contracts for companies without a regional headquarters in Saudi Arabia – albeit with certain exceptions. This is not mere bureaucracy; it is a lever designed to force multinationals to redraw their regional management maps. The pressure is paired with incentives. RHQ participants are offered privileges, including a zero rate of corporate income tax and withholding tax for an extended period, against the backdrop of the standard 20% corporate tax rate applied to foreign companies in Saudi Arabia. The impact is visible in the pace: in October 2024, the figure cited was 540 companies with regional headquarters in Riyadh; by October 2025, it had already reached 675. More important than the headline record is the cumulative effect – once offices move, bankers, auditors, consultants, and entire service chains tend to follow.
The macroeconomic “shop window” of reform makes this shift psychologically easier for business. The IMF recorded 4.5% growth in real non-oil GDP in 2024, while private non-oil investment rose 6.3% year on year. In parallel, Riyadh is reshaping the institutional environment. Investment regulation is being updated around the principle of equal treatment for domestic and foreign investors, and special economic zones – with tax and regulatory incentives – are being promoted to capture manufacturing and logistics projects, the kind that previously, almost by inertia, flowed into Emirati free zones.
For the UAE, this is painful for another reason: it has to “hold the line” amid domestic changes of its own. Since June 1, 2023, the country has had a federal corporate tax. The baseline rate is 9% on profits above the threshold, while special regimes remain in place for parts of the free-zone ecosystem. This does not make the UAE unattractive, but it does alter investor psychology. The old image of absolute tax exceptionalism fades at precisely the moment when Saudi Arabia, by contrast, is handing out targeted super-incentives to the very firms it wants to lure.
Next comes the battle over routes and logistics, because control over flows is an extension of control over decisions. Saudi Arabia’s National Transport and Logistics Strategy sets the ambition of entering the global top 10 in logistics performance while simultaneously expanding aviation capacity. Targets include 300+ million air passengers and 4.5+ million tonnes of air cargo. At sea, the emphasis is on a sharp increase in port capacity and on logistics belts around terminals – so that cargo does not merely pass through in transit, but leaves value added inside the country.
The Jeddah node is especially illustrative. In 2025, Dubai-based logistics giant DP World and the Saudi Port Authority (MAWANI) launched the upgraded South Container Terminal in Jeddah. Its capacity more than doubled – from 1.8 million twenty-foot equivalent units (TEU) to 4 million TEU, with a trajectory to 5 million TEU. Nearby, a logistics park is being built with a price tag of 900 million riyals (about $240 million) and an area of roughly 415,000 square meters. The regulator also reported that in 2023 agreements were signed for nine logistics zones and centers across several ports, with total investment exceeding 6 billion riyals (about $1.6 billion). In October 2025, there was discussion of a potential deal between the French logistics company CMA CGM and the Red Sea Gateway Terminal worth $450 million for a fourth terminal in Jeddah – evidence of a drive to boost competitiveness on the Red Sea axis in particular, even amid the turbulence that followed the Red Sea crisis.
For the UAE, logistics is part of the national identity of economic success. Jebel Ali Port and its surrounding ecosystem have been the heart of re-export and transit for decades. In 2023, Jebel Ali’s container throughput reached 14.5 million TEU – its highest level since 2018. In the first half of 2024, the port handled 7.3 million TEU, and then set a monthly record in July at 1.4 million TEU. But Saudi strategy is not aimed at “crashing” Dubai; it is designed to ensure that the region’s future growth no longer automatically gets capitalized through the UAE. The higher the capacity and service quality in Jeddah, Dammam, and the emerging logistics zones, the easier it becomes for global carriers and cargo owners to justify a redistribution of flows – especially when the end market lies inside the Kingdom itself.
An even more sensitive front is air transit. Saudi Arabia’s aviation strategy aims to raise annual passenger traffic to 330 million by 2030 and expand cargo capacity to 4.5 million tonnes, supported by a network of 250+ destinations. Another benchmark has also been cited: roughly 30 million transit passengers by 2030, up from around 3 million in 2019. This is a direct challenge to a model in which Dubai – and Emirates – have been capturing East-West flows for decades. Even a partial reallocation of transit would mean for the UAE not only fewer passengers, but fewer high-margin aviation-adjacent services as well – from ground handling and maintenance, repair and operations to hotels and business travel.
Then there is financial jurisdiction and the rules of the game for capital. Here, the stakes are measured in trust – in the legal system, arbitration, and predictability. The UAE remains strong, and the numbers reflect that. The Dubai International Financial Center (DIFC) reported 6,920 active companies in 2024 (a 25% year-on-year increase), revenue of 1.78 billion UAE dirhams (about $485 million), and operating profit of 1.33 billion dirhams (about $362 billion). By mid-2025, DIFC was already citing 7,700 active companies based on first-half results. The Abu-Dabhi Global Market (ADGM) is accelerating as well: 2,972 companies as of June 30, 2025, and a 42% increase in assets under management, with 154 managers and 209 funds. DIFC also singled out growth in the hedge-fund segment: the number of hedge funds surpassed 100, with a notable share of managers overseeing $1 billion+ in capital.
Riyadh is trying to build an alternative by overhauling legal and regulatory frameworks – and by creating a domestic financial engine to fund Vision 2030 projects. Financial-sector reports have cited figures such as: private-sector lending rising to 69% of GDP and reaching SAR 2,752 billion; the number of active fintech companies increasing to 261; and electronic payments accounting for 79% of retail transactions. The same materials have put locally managed assets at around 1 trillion riyals (about $266 billion), and foreign ownership in the capital market at over 420 billion riyals ($112 billion). The Capital Market Authority has noted that assets under management exceeded 1 trillion riyals by the end of 2024, the number of investment funds reached 1,549, and the number of subscribers in public and private funds surpassed 1.72 million.
These are the contours of what the UAE could face if the Saudi transformation maintains its pace. It would be less a flight of companies out of Dubai and Abu Dhabi than a functional stratification. Headquarters tied to Saudi contracts and megaprojects relocate to Riyadh, while finance, deal structuring, compliance, family offices, and parts of asset management remain in the UAE for a long time. Yet even a hybrid model shifts the most “expensive” links in the chain toward the Kingdom. With decision-making go consulting, audit, legal services, corporate finance, and regional marketing. Against this backdrop, the UAE is already responding by accelerating its own strategy. Dubai has set a course to double the economy by 2033 and continues to project investment appeal – one figure cited was $45.6 billion in annual foreign direct investment inflows in 2024.
The main danger for the Emirates is not that someone will forcibly “take away” their current hub status, but that the trajectory of the region’s future growth is changing. Where once the Gulf’s overall growth almost automatically capitalized in Dubai (and partly in Abu Dhabi), Riyadh is now trying to lock in a rule under which that growth is capitalized primarily inside Saudi Arabia.
The political arena is unsettled as well. It is the same nerve as in economics – only with higher stakes, because the question is no longer about headquarters and capital flows, but about who sets the rules of regional politics. Both Abu Dhabi and Riyadh are striving to become the principal “center of gravity” through which negotiations, ceasefires, and security architecture are routed – especially along the Red Sea corridor and around the Arabian Peninsula.
The clearest example is the civil war in Sudan, which erupted in April 2023 between the Sudanese Armed Forces and the Rapid Support Forces (RSF). For Saudi Arabia, a conflict on the opposite shore of the Red Sea is a direct source of strategic risk. Riyadh is simultaneously building tourism megaprojects and a modernization “showcase” on its own coastline – public plans speak of dozens of resorts and thousands of hotel rooms – which means any prolonged instability nearby raises insurance costs, heightens investor anxiety, and undermines the image of the “safe western shore” as a magnet for capital.
Hence the desire for Saudi Arabia to seize the mediator role as early as possible. As early as May 2023, with Saudi and US mediation, the parties signed the Jeddah Declaration on the protection of civilians, followed by an agreement on a short-term ceasefire and humanitarian measures. Yes, truces repeatedly collapsed and the negotiating framework stalled, but the political meaning for Riyadh was obvious: Sudan was meant to become an example of how Saudi Arabia now “opens the door” to settlements – and controls the diplomatic traffic along the Red Sea front.
At the other end of the Sudan story, the UAE is increasingly finding itself in the spotlight. According to a range of reporting cited by human-rights advocates, sources in international bodies, and major media outlets, the Emirates have been suspected of supporting the RSF – support that, in critics’ reading, does not dampen the war but rather complicates it. Amnesty International, for instance, has described allegations involving arms deliveries and supply routes, arguing that an inflow of weapons is fueling the conflict; the UAE, however, has rejected these accusations.
Reuters reported that a UN panel of experts was investigating possible Emirati links to weapons found in Darfur, amid recurring allegations that Abu Dhabi has been supplying the RSF – claims the UAE has denied. It is also telling how sharply the conflict has “politicized” relations. In May 2025, Reuters wrote that Sudanese authorities announced a break in relations with the UAE; the report emphasized that Sudan’s army has long accused the Emirates of arming the RSF, while the UAE denies doing so.
As a result, Sudan is turning into an arena of competing approaches. Saudi Arabia is betting on mediation and de-escalation because it needs a predictable Red Sea belt for its own development strategy. The UAE, even as it formally rejects the allegations, is increasingly caught in a “hard-power” narrative – in which it is perceived as a player operating through networks of influence and partners on the ground. And the sharper this reputational fork becomes, the harder it is for both states to sustain the image of joint “stabilizers of the region.”
Yemen is an even more painful illustration of this hidden rivalry, because here the split emerged inside what was, formally, a single coalition. Over time, the UAE effectively diverged from the Saudi line and built its own architecture of influence in the south, backing forces that became an alternative to the internationally recognized authorities. At the center of this arrangement is the Southern Transitional Council (STC), which international reports and human-rights materials have repeatedly described as a force relying on Emirati support.
Saudi Arabia, by contrast, sought to preserve at least the formal unity of the anti-Houthi camp around the recognized government. That is why, in 2019, it acted as the principal broker of the Riyadh Agreement – intended to halt fighting between government forces and the STC and “stitch” the front back together. But the structure remained fragile, because a de facto third power was taking shape on the ground. And in December 2025, this conflict broke out into the open again. Reuters reported that on December 8 the STC declared broad control over the south, including Aden – a city that for roughly ten years had served as a base for the Saudi-backed, internationally recognized government.
Then, on December 12, Reuters wrote about a joint Saudi-Emirati delegation arriving in Aden amid reports of fighting and casualties in Hadramawt. According to Yemeni official sources cited in the reporting, the attacks were linked to groups affiliated with the STC, with figures of at least 32 killed and 45 wounded. British media, in parallel, noted that Saudi-backed forces were being moved toward the border, and that the STC had received warnings that its territorial gains could trigger a forceful response. The very fact that such wording has returned matters more than the details. It suggests that the “division of roles” between Riyadh and Abu Dhabi in Yemen is once again turning into a direct dispute over legitimacy and control of the south’s key nodes.
There are other manifestations of political competition that are less bloody, but no less revealing. First, there is the struggle for the status of principal mediator – now on the global stage. Saudi Arabia hosted talks on Ukraine in Jeddah in August 2023, with participation from more than 40 countries; Reuters described this as a diplomatic success for the Saudi hosts and an attempt to strengthen their international role. The UAE, for its part, has been accumulating “mediator capital” through regular prisoner exchanges between Russia and Ukraine. Reuters, for example, reported on such exchanges in December 2024 and in August 2025, underscoring Emirati mediation and the specific scale of the swaps.
Second, there is the contest for the Red Sea and the Horn of Africa, where influence is measured in access to ports, bases, security agreements, and infrastructure. In 2024-2025, a number of think tanks described the region explicitly as a theater in which Saudi-Emirati competition takes the form of an “influence game” and proxy-style rivalry.
Third, the two capitals increasingly embody different foreign-policy models in the Middle East’s core. After normalizing relations with Israel, the UAE gained additional political leverage and new channels of influence in Washington and across the region – an asset that many research platforms treat as a key element of Abu Dhabi’s foreign-policy capitalization. Saudi Arabia, by contrast, has more and more sought to position itself as the chief architect of de-escalation and of “grand bargains,” wagering on negotiation tracks and risk management rather than relying primarily on networks of partners on the ground.
The overall conclusion almost writes itself. The economic competition between Abu Dhabi and Riyadh has long ceased to be “healthy rivalry for investment” and is increasingly turning into a struggle over the region’s center of gravity. In the economic domain, this is expressed in the tug-of-war over headquarters, logistics flows, and financial infrastructure: through Vision 2030 and the regional HQ regime, Saudi Arabia is trying to shift the managerial core to Riyadh, while the UAE is working to retain its role as the traditional hub. In politics, the same logic shows up in the competition for mediation platforms and influence in conflict zones from Sudan to Yemen, where different bets on local actors and different approaches to settlement generate not synergy, but friction.
The paradox is that, despite the sheer scale of resources on both sides, this race can start working against them. If rivalry hardens into a zero-sum game, it will not so much consolidate one capital’s leadership at the other’s expense as raise the cost of regional instability for everyone. Investors and multinationals are always sensitive to political risk and to signs of fracture among key players; capital markets and logistics are especially vulnerable to uncertainty over the rules of the game and to geopolitical turbulence. In that scenario, gains from relocated headquarters – or from individual port and finance deals – may translate into a higher regional risk premium across the Gulf, the diversion of some projects to other jurisdictions, and a reduction in the region’s appeal as a single, predictable space for business and security.
Even more dangerous is the way political disagreements can undermine economic objectives. When regional crises become arenas of competition, countries get pulled into contradictory alliances, reputations as mediators deteriorate, and partners’ trust erodes. And without trust, mediation stops being capital – it becomes grounds for suspicion. In the end, both sides risk losing the very thing they are now trying to monetize: governability, and the image of a stable center that attracts money, people, and negotiations.
Finally, over the longer term, this dynamic could undercut plans for integration within the Gulf Cooperation Council. Any meaningful integration requires at least minimal agreement on rules, coordination of economic policy, a shared logistics and energy architecture, and basic foreign-policy alignment. If the Council’s largest and most ambitious members instead move along the logic of competitive divergence, this will inevitably dilute a common agenda, reduce integration initiatives to a set of declarations, and deepen internal fault lines. In the worst case, the GCC risks remaining a forum of protocol-level unity without strategic cohesion – and the price of that gap would be borne by all.
That is why the central question is not who will “win” the contest of hubs and mediators, but whether Abu Dhabi and Riyadh can agree on the boundaries of competition and on areas of compromise. If they cannot, the rivalry will begin to erode both sides’ positions at once – along with the resilience of the entire regional architecture they both aspire to lead.
