Western business executives are preparing contingency plans as deteriorating relations between Saudi Arabia and the United Arab Emirates (UAE) raise concerns that the dispute could affect commercial operations across the Persian Gulf region.
Bloomberg reported on Monday that some global investment banks fear they could eventually have to choose between Abu Dhabi and Riyadh if tensions between the two countries continue to escalate.
According to the report, some firms have already drawn up contingency plans based on worst-case scenarios. Others are reviewing contracts for force majeure clauses and reassessing business relationships that could expose them to punitive measures from either side.
Bloomberg said several law firms have become more selective about the work they take on to avoid antagonizing either country, while investors are adjusting to an increasingly uncertain business environment.
Saudi Arabia and the UAE are at odds over several geopolitical flashpoints, including Yemen, Sudan and Israel.
According to the report, tensions intensified following the joint US-Israeli aggression against Iran and Tehran’s retaliatory strikes on US military bases in the region.
The dispute is also raising concerns on Wall Street, where financial institutions are closely watching developments because Saudi Arabia and the UAE control sovereign wealth funds worth trillions of dollars and remain key sources of global investment.
Saudi Arabia has sought to establish Riyadh as a regional business hub, while the UAE has expanded oil production since leaving the Organization of the Petroleum Exporting Countries (OPEC) in May, adding another point of divergence between the two countries.
Recent reports have pointed to signs that the deterioration in relations is beginning to affect trade and financial transactions.
Semafor reported last week that trucks crossing from the UAE into Saudi Arabia have faced delays lasting several days, with some drivers reportedly waiting up to a week for permission to cross the border.
The Financial Times (FT) reported growing cases of “under-the-radar financial sanctions,” saying Saudi banks have delayed or blocked transfers to UAE-based accounts.
According to the FT, payments from Saudi banks to companies and individuals with accounts in Dubai have been returned or delayed since May.
Saudi Arabia, the UAE and Qatar have long been lucrative cash cows for the United States and Western corporations.
Bloomberg said that, in a worst-case scenario, the dispute could resemble the 2017 rupture with Qatar, when Saudi Arabia, the UAE, Bahrain and Egypt severed diplomatic ties with Doha, accusing it of aligning with Iran.
While noting that the circumstances differ from those surrounding the Qatar crisis, Bloomberg said it could not rule out the possibility that a renewed regional split in West Asia would have significant implications for global financial markets.
