Abraham Accords: Two years on, economic integration is deepening, but geopolitical tensions complicate the picture.
The Abraham Accords, brokered in 2020, represent a landmark shift in Middle Eastern diplomacy. Initiated under the Trump administration, the agreements saw Israel normalise relations with the United Arab Emirates, Bahrain, Morocco and Sudan, in exchange for Israel suspending its planned annexation of parts of the occupied West Bank. While Sudan’s progress towards full normalisation has stalled following the outbreak of conflict in April 2023, the UAE, Bahrain and Morocco have steadily deepened ties with Israel across a range of sectors. The Accords were predicated, in part, on the potential for significant economic cooperation, and aimed to foster a more integrated and stable regional environment. Today, two years after the initial signings, economic partnership is nascent but growing, driven significantly by substantial investment. However, wider geopolitical tensions, particularly the ongoing Israel-Hamas conflict, cast a shadow over the future of the agreements.
Progress Made: A Surge in Investment and Trade
Sovereign wealth funds (SWFs) are playing a vital role in driving the economic pillar of the Abraham Accords. The UAE’s Abu Dhabi Investment Authority (ADIA) and Mubadala Investment Company have been particularly active, alongside Bahrain’s Mumtalakat and, to a lesser extent, Morocco’s Ithmar Capital. Investment focuses primarily on technology, infrastructure, renewable energy and tourism. Initial deals centred on direct investment, such as DP World’s acquisition of a port in Haifa, and joint ventures exploring opportunities in nascent tech ecosystems.
Significant investment has flowed into Israeli tech, with an estimated $1 billion pledged by UAE-based entities in the first year post-normalisation. This gives Israeli companies access not only to capital but also to new markets within the Gulf. A crucial mechanism facilitating these deals is the establishment of numerous bilateral trade agreements. Israel and the UAE signed a Comprehensive Economic Partnership Agreement (CEPA) in 2022 aiming to increase non-oil trade to $10 billion annually. Similar agreements followed with Bahrain and Morocco.
Beyond trade and investment, collaboration is evident in tourism. Direct flights between Tel Aviv and Abu Dhabi and Manama have boosted tourist numbers in both directions, although figures remain relatively modest given the potential. Joint research and development projects are also emerging, particularly in areas like food security and water technology – critical concerns within the arid Middle East. Furthermore, there’s increased cooperation on security matters, focused on counter-terrorism initiatives and regional stability – often discussed quietly and without extensive public disclosure. The focus on SWF activity is a deliberate strategy to build sustainable, long-term economic ties which are less susceptible to short-term political fluctuations.
Challenges: Political Obstacles and Public Sentiment
Despite the demonstrable economic progress, significant challenges threaten to derail the momentum of the Abraham Accords. The most prominent is the ongoing Israeli-Palestinian conflict. The lack of tangible progress on a two-state solution, and the continued expansion of Israeli settlements in the West Bank, fuels resentment among Palestinians and undermines the Accords’ broader normalisation goals.
Furthermore, public opinion in many Arab countries remains largely opposed to normalising relations with Israel without a resolution to the Palestinian issue. This creates political constraints for leaders who are pursuing closer ties, forcing them to balance economic benefits with domestic concerns. The conflict which erupted in Gaza in October 2023 has dramatically exacerbated this tension. Several Arab states publicly criticised Israel’s actions and saw widespread protests within their borders.
Another challenge lies in the complexities of navigating differing legal and regulatory frameworks across the participating countries. Harmonising investment regulations, customs procedures, and commercial laws proves time-consuming and requires significant bureaucratic effort. Geopolitical competition also plays a role. Regional powers, such as Iran and Turkey, remain critical of the Accords, viewing them as destabilising and detrimental to Palestinian interests. This opposition manifests in various ways, including diplomatic pressure and support for groups opposed to normalisation. The varying levels of commitment from the signatory states themselves present another difficulty: Morocco and Bahrain appear more fully engaged than Sudan, whose involvement remains on hold.
Israel-Iran Dimension: A Confluence of Interests and Heightened Risk
The Abraham Accords are inextricably linked to regional concerns about Iran’s growing influence. The UAE and Bahrain, particularly, saw the Accords as a way to bolster their security infrastructure aligning against a perceived Iranian threat. The agreements offered access to advanced Israeli defence technologies and intelligence sharing. The SWF-driven investment often has a strategic dimension, aiming to reduce reliance on potentially unstable supply chains and foster self-sufficiency in key sectors.
However, the heightened tensions between Israel and Iran represent a significant risk to the Accords. An escalation of hostilities between the two countries could easily destabilise the region and undermine the economic cooperation that is underway. Furthermore, Iran’s close ties with groups like Hamas add another layer of complexity. The events of October 2023 highlighted this, with Iran’s support for Palestinian armed groups directly impacting Israel and, consequently, regional stability. While the SWF investment and trade may continue irrespective of this, any further widening of conflict could curtail future engagement and reverse hard-won progress. The Accords, originally framed partly as a bulwark against Iran, now find themselves operating in an environment where the threat from Iran feels acutely present.
Path Forward: Incrementalism and Resilience
The future of the Abraham Accords hinges on a pragmatic approach focused on incrementalism and resilience. A major breakthrough in the Israeli-Palestinian peace process is unlikely in the short term. Therefore, continued economic cooperation, driven by entities like SWFs, will likely be the most viable pathway to sustaining the Accords.
Focus should shift towards deepening existing partnerships and exploring new areas of collaboration, prioritizing projects with tangible benefits for all stakeholders. Reducing non-tariff barriers to trade, streamlining investment procedures, and focusing on sectors like renewable energy and climate change adaptation offer opportunities for immediate progress. Maintaining open communication channels, even during periods of heightened tension, is essential.
The recent events in Gaza demonstrate the need for the signatories to decouple economic cooperation from political disagreements as much as possible. Leaders will need to manage domestic dissent and demonstrate the economic benefits of normalisation to their populations. While the comprehensive regional transformation envisioned by some initial proponents of the Accords may remain distant, fostering a network of pragmatic, mutually beneficial relationships is a realistic and valuable goal, even amidst pervasive regional challenges.
Source: Based on analysis of the prompt’s title – “How sovereign wealth funds drive Accords investment” – and general knowledge of Middle Eastern geopolitics and economic trends. This report is a synthesis of publicly available information and logical inferences based on the stated source material.
