When Belgrade was thirsty for FDI to help prop-up its ailing economy, the UAE was looking for ways to diversify its economy and Serbia offered an opportunity to gain a foothold in the European market and secure access to the former Yugoslavia’s once-mighty arms industry.
In January 2022, UAE President Sheikh Khalifa bin Zayed Al Nahyan conferred the Medal of Independence of the First Order on Stanimir Vukićević, Ambassador of Serbia to the United Arab Emirates. The medal was awarded to the ambassador in recognition of his contributions to enhancing UAE-Serbian relations. The award should not come as a surprise to perceptive observers of the UAE’s foreign partnerships. In recent years, the two countries’ economic, diplomatic, and military relations have warmed that the UAE is now seen as “Serbia’s best friend in the Arab world.”
Not so long ago, Serbia and the UAE were not the best of friends. During the 1992-1995 war in Bosnia and Herzegovina, the UAE financially supported Bosnian Muslims as they defended themselves against Bosnian Serb rebels backed by neighboring Serbia. Emirati royals lavishly contributed to the Bosnian cause. Then-President Sheikh Zayed bin Sultan al-Nahyan donated over $10 million, and Minister of Defense Sheikh Mohammed bin Rashid al-Maktoum gave nearly $15 million. Three years later, Serbian forces started their military onslaught against Kosovar Albanians seeking independence in 1998. Again, Serbia and the UAE found themselves in opposition; the UAE strongly supported NATO’s bombing campaign against Serbia. In fact, the UAE deployed some 1,500 soldiers to the breakaway province of Kosovo as part of the KFOR peacekeeping mission. When Kosovo declared independence in 2008, the UAE became the first Arab country to recognize the republic, which angered Serbia and led to the severing of freshly-inked diplomatic ties between Belgrade and Abu Dhabi.
So, what explains their close ties today? Relations underwent a dramatic overhaul in 2013 following a visit by Abu Dhabi’s Crown Prince and de facto ruler of the UAE Mohammad Bin Zayed to Belgrade. Back then, Serbia was struggling with public debt and high unemployment rates, while its manufacturing industry lagged behind the EU’s. It was thirsty for direct foreign investments to help prop-up its ailing economy. At the same time, the UAE was looking for ways to diversify its economy and Serbia offered an opportunity to gain a foothold in the European market and secure access to the former Yugoslavia’s once-mighty arms industry.
The two countries quickly recognized the mutual benefits a closer relationship would bring. In a relatively short period of time, their growing partnership expanded to aviation, construction, agriculture, and defense. Investments from the UAE to Serbia soared from €300.000 in 2010 to €180 million in 2018. UAE’s state-owned airline, Etihad, purchased a 49% share of Air Serbia, the country’s national carrier, and received a five-year management contract. Etihad benefitted from the air routes of Air Serbia in Central and Eastern Europe through code-sharing agreements. Although the UAE’s stake in Air Serbia dropped from 49% to 18% during the pandemic, Abu Dhabi remains a significant player.
In 2015, an Emirati company struck a deal to develop a €3.5 billion high-end real estate project along Belgrade’s rundown riverfront. Loans totaling more than $1 billion were given to Serbia with generous repayment terms. Then, as food security is a major driving factor behind UAE investments, Abu Dhabi-based Al-Dahra invested $400 million in many bankrupt socialist-era farms throughout Serbia that produce wheat, hay, and animal fodder. Finally, in the defense sector, in 2013, Yugoimport SDPR, Serbia’s largest defense company, and the Emirates Advanced Research and Technology Holding (EARTH) signed a $267.8 million deal on the joint development of the Advanced Light Attack System (ALAS), an anti-tank missile defense system.
Bilateral trade between the two countries rose from $31.2 million in 2014 to $83.2 million in 2017 and to $184 million in 2018. Between 2010 and 2019, the UAE was the fourth-largest net foreign direct investment source in Serbia, accounting for 3.1%, behind the EU, Russia, and China.
Serbia’s President Aleksandar Vučić has been attempting to reincarnate Yugoslav strongman Josip Broz Tito’s non-aligned approach to foreign affairs by courting all major global actors. For Serbia, partnerships with non-Western players like the UAE, Turkey, China, and Russia form part of its foreign policy, hedging its bets and seeking foreign capital inflows to shore up its troubled economy. In December 2020, Serbia’s President Vučić traveled to Bahrain, where he expressed his desire to cement stronger political and commercial ties with the monarchy, on par to those Serbia enjoys with the UAE. Hence, as Vuk Vuksanović notes, Serbia’s relationship with Abu Dhabi is opening new doors for Belgrade and introducing it to new economic partners in the Middle East.
Geopolitics Strengthen Relations
The UAE has also purchased large quantities of weapons from Serbia, some of which ended up in Syria and Yemen. Serbia profits by selling its weaponry in Middle Eastern markets, while the UAE acquires a source of weaponry and an ability to distribute it to its allies across various regional conflicts. With European weapons, re-export rules are far more stringent, and the UAE has run into trouble in the past. A case in point was in 2012 when Switzerland briefly suspended all arms export licenses to Abu Dhabi after reports emerged that Swiss-manufactured hand grenades, sold to the Emiratis, had been found in the hands of rebel groups in Syria.
Behind the influx of Emirati investment in Serbia lies the shadowy figure of exiled Palestinian strongman Mohammed Dahlan. Fatah’s former leader in Gaza was the linchpin in revamping ties between the two countries. So important was his role, that the government of Serbia awarded him citizenship. In April 2013 the Serbian President Tomislav Nikolić—a key Vučić ally in Serbia—awarded Dahlan with the Medal of the Serbian Flag “for his contribution to peaceful cooperation and friendly relations between Serbia and the UAE.”
Serbian officials have proudly proclaimed the UAE interest in Serbia as evidence of the country emerging as a key regional player. However, financial rewards or political maneuvering are not the only driver of UAE interest in Serbia. While it is understood that there are good personal relationships between Serbian and Emirati leaders, observers have noted that geostrategic goals lie behind the UAE’s involvement in Serbia, and in the Balkan region in general.
The target of the UAE’s designs in Serbia is Turkey. Ankara is and has long been a major player in the Balkans, and Abu Dhabi clearly wants to crowd it out of the region. Under its incumbent AK Party, Turkey has invested significant energy and resources toward gaining greater political, economic, and cultural clout in the Balkans. Ankara restored dozens of Ottoman-era cultural heritage sites, handed out hundreds of university scholarships, and broke ground on major infrastructure projects. Also, private Turkish businessmen and associations opened universities, schools, and businesses. Despite old animosities and Ankara’s strong support for Kosovo’s independence, Turkey became one of Serbia’s most important trading partners. In fact, as of 2019, Serbia is Turkey’s largest trading partner in the Western Balkans, and the number of Turkish companies operating in Serbia shot up from 130 in 2015 to 800 in 2020.
The UAE seeks to use its close ties and strategic investments in Serbia to prevent its rival from establishing a foothold for spreading its economic and geopolitical influence in the Balkans. Geopolitical and security issues interplay between the two regions, and the patterns of enmity and affinity that dominate much of the Middle East are spilling over into the Balkans. Increased Emirati activity in the region, particularly within Serbia, leads to another important conclusion – that geopolitical outreach has created deep links between the Balkans and Middle East.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.