By Federico Maccioni, Nazih Osseiran and Maha El Dahan
DUBAI, Feb 6 (Reuters) – Some UAE companies have pulled out of a major defence show taking place in Saudi Arabia, two sources with direct knowledge of the matter told Reuters, the latest sign that a rift between the two Gulf oil powers is seeping into business interests.
The World Defense Show is set to take place in the Saudi capital Riyadh from February 8-12. It was not immediately clear if all the UAE participants involved in the country pavilion had withdrawn.
There was no immediate comment by the UAE foreign ministry or the Saudi government media office on the matter.
TRICKLE-DOWN EFFECT
Once the twin pillars of regional security, the two Gulf heavyweights have seen their interests diverge on everything from oil quotas to geopolitics.
Their disagreements came out into the open in December when an advance by a UAE-backed southern Yemeni separatist group brought it too close to Saudi borders for comfort and quickly escalated to a Saudi-led coalition strike on a UAE-linked weapons shipment at the port of Mukalla.
The UAE has since withdrawn all its forces from Yemen, but tensions have grown with Saudi Arabia alleging the UAE had helped a leading Yemeni separatist figure escape through Somalia.
The UAE withdrawal from the annual defence event shows the disagreement between the two oil powers could spill over into the many trade and investment relations that bind them together.
While cross-border dealmaking remains largely unaffected for now, tensions are starting to trickle down to the business community which has been quietly preparing for potential disruptions even as day-to-day commerce continues, two Gulf-based business sources have said.
REGIONAL PRECEDENT
The longer this latest Gulf feud lingers the more fears are likely to grow within the business community of a repeat of something similar to the trade boycott that hit Qatar in 2017 during its own standoff with Gulf neighbours.
Saudi Arabia and the UAE have $30 billion in trade ties, with goods and executives constantly moving between the two.
During the Qatar blockade, which ended in 2021, some Saudi‑linked funds imposed restrictions preventing capital from being deployed there — conditions investors fear could re‑emerge if the current rift widens.
At the time, banks had to choose whether to be on the side of the UAE and Saudi or Qatar.
This time around, the stakes are high with the two economies intricately connected.
Numerous Saudi family‑owned conglomerates and major firms maintain significant operations and personnel in the UAE, where many of their commercial leadership teams are based.
Questions that would have been unthinkable months ago about potential disruptions to flight schedules and supply chains are now part of internal risk assessments, the two Gulf-based business sources said.
“Everyone stands to lose if this escalates,” said one senior business figure.
(Reporting by Federico Maccioni, Nazih Osseiran, Maha El Dahan, Hadeel Al Sayegh, Timour Azhari and Rachna Uppal; Editing by Jan Harvey, Louise Heavens and David Holmes)
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