US freezes Abraham Fund, as Israel-UAE business ties falter

Abraham Accords signing ceremony Photo: Avi Ohayon GPO
Abraham Accords signing ceremony Photo: Avi Ohayon GPO

The Biden administration is not allocating a budget for regional projects, while the UAE is pressing Israel not to cancel the Red-Med oil pipeline, sources have told "Globes."

The US administration has suspended the Abraham Fund indefinitely, US and Israeli sources close to the matter have told "Globes." The Abraham Fund was set up after the signing of the Abraham Accords between Israel, the UAE and the US in September 2020 and the signatories were meant to finance the fund along with other countries who would join later.

At the time of its establishment an announcement said, "The Fund will realize the commitments in the Abraham accords. The Fund will inject more than $3 billion into the development investment market in the private sector to promote economic cooperation and to encourage prosperity in the Middle East and beyond. The countries who are partners in establishing the fund will welcome other countries joining in order to promote its aims."

The Abraham Fund was already operating in October 2020 and within three months examined hundreds of requests for funding of various ventures. It also approved more than ten of the ventures in the fields of energy, food-tech, and fintech. The Abraham Fund also approached large financial institutions in the US who were asked to join the efforts in order to increase the capital in the fund.

However, the election of Joe Biden as the new US President brought activities to a halt. At the end of January, shortly after Biden's swearing in ceremony, Rabbi Aryeh Lightstone, who had been appointed by Donald Trump to head the Abraham Fund, stepped down. Since then the Biden administration has not replaced him. The Biden administration supports the Abraham Accords, even though they were signed by Trump, but it is less enthusiastic about allocating money to the Abraham Fund from its budget. Israel's Ministry of Foreign Affairs spoke to sources in Washington on the matter and Washington told Jerusalem that the activities of the Abraham Fund were being re-assessed.

Reports in the US said that among the reasons for the re-evaluation was the huge expenditure that the Biden administration needs to make in the economic recovery from the Covid-19 crisis. A senior US source told "Globes" that the White House is interested in the promotion and the success of the Abraham accords and bringing in additional partners for these measures but the focus will be on the diplomatic dimension and the fund itself has been frozen indefinitely. An Israeli source confirmed this and said that in talks with the Americans, both during the previous Israeli government and the current government, it was made clear that the Fund's activities are not on the agenda.

This suspension was one of the reasons that the UAE set up a fund for investments in Israel, which was announced in March 2021. But since then this fund also has failed to get off the ground. Former Israeli Prime Minister Benjamin Netanyahu and UAE Crown Prince Mohamed bin Zayed agreed on the fund and Netanyahu had hoped to visit Abu Dhabi before the March elections for a joint declaration on the matter, but due to a diplomatic spat with Jordan the move never went ahead.

In March, bin Zayed also announced the setting up of an additional $10 billion fund in Israel, which would invest in energy, industry, infrastructures, space, health and more. The fund declared that it would stress supporting ventures that would promote the welfare and economies of the two countries and the entire region and that it would operate mainly in the private sector.

But almost four months have passed and a new Israeli government has been installed and nothing has happened with that fund except for some general discussions between Israeli Ministry of Foreign Affairs representatives and their UAE counterparts, on ways to promote the fund's activities and tighten diplomatic agreements to suit activities.

On the Israeli side, the Ministries of Economics, Infrastructures and Energy and others are discussing which projects to propose to the new fund. Israel's hope is that the agreements signed by Minister of Foreign Affairs Yair Lapid during his visit to the UAE last week will provide a legal framework in Israel for investments by the UAE government through the fund. One or two Israeli government ministers are expected to visit the UAE soon, to discuss the fund and ways of implementing it.

But in practice, the fund has not actually been established and does not seem to be on the horizon. In Abu Dhabi they are meanwhile examining the new Israeli government's conduct and its ability to promote business and economic links between the two countries. Among other things, DP is waiting for developments on the Haifa Port tender with Sultan Ahmed bin Sulayem wanting to bid for the project. Of course there is also the Europe-Asia Pipeline Co. (EAPC) issue on the agenda.

The business relations between Israel and the UAE are blighted by an emerging dispute with the new Israeli government and diplomatic business incidents. Last week "Globes" reported on the anger of businesspeople from two of the UAE's wealthiest families over a cancelled meeting with Lapid during his visit to Abu Dhabi.

A business source in the UAE told "Globes" that Israel's retreat from the agreement that the EAPC signed with Med-Red Land Bridge Ltd., to convey oil from the Persian Gulf to Israel for supply to Mediterranean customers, will harm economic relations between the countries and serve as a future deterrent for UAE companies. The source said that the successful implementation of the agreement - in other words shipping the first containers of oil to Eilat port and then conveying it to Ashdod without any hitches or leakages, would dispel Israeli concerns and the potential to expand the agreement is huge.

There are voices in the new Israeli government to cancel the agreement, among other things, because of the opposition to it by Minister of Environmental Protection Tamar Zandberg and other ministers. Minister of Foreign Affairs Yair Lapid told "Globes" during his recent visit to the UAE that he was studying the issue. "We don't want to harm the environment. We must look after our country and we cannot have a repeat of past catastrophes (the leak in Nahal Evrona)." The issue will be heard by the High Court of Justice and the government is yet to respond to the petition on the matter.

A diplomatic source in the UAE told "Globes" that the issue was barely touched on during Lapid's visit, although it was made clear to Israel that cancelling the agreement would harm cooperation in the field of energy, which would also extend to natural gas and possible investments by UAE companies in infrastructure venture investments in Israel. The UAE source also said that the UAE is expecting the new government to meet all the commitments of the Netanyahu government and the EAPC agreement is one of them.

One of the paradoxes of Israeli diplomatic activity in the UAE is the gap between the economic results that it is generating and the conditions under which Israeli diplomats are working there due to major budgetary hardships. For example, the consulate in Dubai, which had meant to take up the entire floor of an office building, is currently only renting several rooms. Even the opening ceremony for the consulate, attended by Lapid and the UAE Minister for Artificial Intelligence, was held in a hall rented only for the occasion.

Due to these difficulties, activities are not extensive enough and the huge potential is not being realized. "Globes" has learned that the official apartment of Israel's consul general in Dubai, Ilan Shtulman, is only partially furnished and he has to sleep on a matrass on the floor because he has no budget for the purchase of a bed. In addition the staff of the consulate as well as the embassy in Abu Dhabi is not complete and creative administrative solutions have been put in place due to the budgetary shortfall.

The Ministry of Foreign Affairs says, "Both the Israeli Embassy in Abu Dhabi and the Consulate General in Dubai have been operating as fully organized offices since the start of the year. Because these are new offices, there is a set procedure for approving budgets, positions and staff. The Ministry of Foreign Affairs is working to fully staff the representative offices as soon as possible and provide a budget suitable for its activities."

Published by Globes, Israel business news - - on July 7, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Abraham Accords signing ceremony Photo: Avi Ohayon GPO
Abraham Accords signing ceremony Photo: Avi Ohayon GPO
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