By Emily Rose and Alexander Cornwell
JERUSALEM/DUBAI (Reuters) - The war in Gaza has cooled Israeli business activity with the United Arab Emirates, with the once-celebrated relationship now conducted away from public scrutiny amid anger in the Arab world over the conflict.
The UAE became the most prominent Arab state in 30 years to establish formal ties with Israel under a U.S.-brokered agreement in 2020, dubbed the Abraham Accords. It has maintained the relationship throughout Israel's more than six-month war in Gaza.
In the wake of the accords, Israeli entrepreneurs began flocking to the Gulf state on direct flights from Tel Aviv, establishing new business ties and expanding existing relationships that were once kept a secret. Deals announced before the war included investments in cyber security, fintech, energy and agri-tech.
Ten Israeli officials, executives and entrepreneurs told Reuters that business ties with the influential Gulf state remain intact but, in a sign of how the conflict has dented enthusiasm, they declined to discuss any recent deals.
"It's still happening. It's happening less; it's less in your face," said Raphael Nagel, a German Jewish entrepreneur living in the UAE who heads a private business group that promotes business ties between Israel and the Gulf Arab state.
Six bankers and lawyers in the UAE also said that business ties between Israeli and Emirati companies have endured the war but that few new deals were happening.
The UAE government was wary about promoting relations with Israel, they said. In Israel, meanwhile, many businesses have had staff called up for military service, impacting operations.
A UAE official did not directly respond to Reuters' questions about how the economic relationship with Israel had been affected by the war. The official said, however, the UAE's diplomatic and political dialogue with Israel had facilitated humanitarian efforts to assist the people of Gaza.
The UAE is the only Arab state still hosting an Israeli ambassador. Tel Aviv recalled its diplomats from other Arab states it has ties with following the Oct. 7 attack by Hamas that prompted its invasion of Gaza.
Israel's foreign ministry did not respond to a request for comment.
After establishing formal diplomatic ties in 2020, Israel and the UAE rapidly built a close economic partnership, unlike the decades-long peace deals with Egypt and Jordan that have failed to establish significant business relations. A trade deal was signed in 2022.
Last year, trade grew 17% to reach $2.95 billion, according to data from the Israel Central Bureau of Statistics. Despite cooling in the wake of the war, trade remained 7% higher year-on-year in the first quarter of 2024, the bureau said.
But Israeli tourists, who became frequent visitors to the UAE, now no longer fill Dubai's hotels, restaurants and bars - although Israelis and Jews say they continue to feel safe in the country.
Unlike other Arab countries, in the UAE there have been no public demonstrations in support of the Palestinians or against Israel. However, symbols associated with Palestinian nationalism, like the black-and-white keffiyeh headdress, can be seen worn by people on the streets of Dubai.
"Things have become more discreet and October 7 does have quite a lot to do with it," said Bruce Gurfein, an American Jew and entrepreneur who first moved to the UAE in the late 1990s.
Hamas militants killed more than 1,000 Israelis and took more than 250 hostage in a cross-border attack on Israel from Gaza on Oct. 7. In response, Israel launched an invasion of the Gaza Strip - with the aim of destroying Hamas and releasing the hostages - that has killed more than 34,000 people, according to Palestinian officials.
International efforts to mediate a ceasefire are ongoing.
'CHILLING' EFFECT
Several Israelis who were already doing business in the UAE before the war said their personal and commercial relationships with Emiratis and other Arabs in the UAE remain unaffected. But they also say that there is a demand, on both sides, not to disclose business ties publicly.
"I think chilling is a fair word," said Elie Wurtman, co-founder of Israeli venture capital firm PICO Venture Partners. "But, on the other hand, ... it's business as usual."
Wurtman believes close ties forged in the immediate period after normalisation have helped sustain the business relationship with the UAE, a sentiment echoed by the Israeli officials and other executives that Reuters spoke to.
An Israeli executive at UAE-IL Zone, a non-government Israeli-based platform that aims to develop UAE-Israel business links, said Emirati officials had assured them that investments into Israel would not be stopped over the war but have asked the Israelis to refrain from making any announcements of deals.
The executive asked not to be identified because they weren't authorized to speak to the media. The UAE official did not comment.
Michael Mirilashvili, the CEO of Watergen, an Israeli company that developed machines that can produce drinking water from the air, signed a three-way water research partnership deal in June 2021 with Abu Dhabi firm Baynunah and Tel Aviv University to advance research in water technology.
Mirilashvili said the partnership with Emirati counterparts remains warm and he hasn't noticed a difference in relations since October 7.
"We continue to work together," he said. "We are having very strong bonds with the people that we work with over there."
Tel Aviv University and Baynunah did not respond to a request for comment.
Robert Mogielnicki, a scholar at the Arab Gulf States Institute in Washington, said the war in Gaza was a "big disincentive" for the UAE to undertake major new economic initiatives.
He noted that there was growing anger and concern over the war among UAE citizens, a minority of about 1 million people in the Gulf state whose population totals around 10 million.
Abu Dhabi state oil company Adnoc and BP put on hold plans to take a $2 billion stake in Israeli gas producer NewMed, the Israeli company said in March, citing regional uncertainty.
Four sources familiar with Adnoc's position said the war in Gaza had influenced the decision to suspend negotiations, citing the optics of moving forward with such a big deal.
Didier Toubia, chief executive of alternative meat start up Aleph Farms, which received investment from an Abu Dhabi state fund during a 2021 financing round, told Reuters that there were now more sensitivities around Israeli companies doing business with Emirati firms.
He predicted that there would be an acceleration in business activity once the war ends.
FRUSTRATION AT NETANYAHU
UAE officials have maintained that forging ties with Israel was a strategic decision that they did not intend to reverse. Some of them, however, have in private expressed frustration at Israel over its prosecution of the war and the high civilian death toll.
Israel has strongly denied deliberately targeting civilians.
The war has fractured the UAE's relationship with Israeli Prime Minister Benjamin Netanyahu, according to four sources familiar with the matter.
They said that the UAE now rarely speaks directly with Netanyahu and that President Isaac Herzog was a key interlocutor in the Israel-UAE relationship.
The UAE had increasing engaged with former prime ministers Yair Lapid and Nafatali Bennet since as Emirati frustrations at Netanyahu grew, the sources said.
Netanyahu's office did not comment. Herzog's office, as well as spokespeople for Lapid and Bennet, declined to comment.
The UAE official did not respond directly to questions about the relationship with Netanyahu's government, but called for intensified efforts to achieve a "a comprehensive and just peace" based on the two-state solution.
Israeli opposition leader Lapid met with foreign minister Sheikh Abdullah bin Zayed Al Nahyan in Abu Dhabi on May 2.
(This story has been refiled to add dropped words in paragraph 37)
(Reporting by Emily Rose and Alexander Cornwell; Additional reporting by Maha El Dahan; Editing by Daniel Flynn)
